Economics Chapter 6 Vocabulary Answers – Flashcards

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Market Equilibrium
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Situation in which the quantity demanded of a good/service at a particular price is equal to the quantity supplied at that price
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Equilibrium Price
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Price at which the quantity of a product demanded by consumers and the quantity supplied by producers are equal
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Surplus
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Result of quantity supplied being greater than quantity demanded, usually because prices are too high
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Shortage
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Result of quantity demanded being greater than quantity supplied, usually because prices are too low
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Disequilibrium
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Situation that occurs when there is an imbalance between quantity demanded and quantity supplied
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Competitive Pricing
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Term describing when producers sell goods/services at prices that best balance the twin desires of making the highest profit and luring customers away from rival producers
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Incentive
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A way to encourage people to take a certain action
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Price Ceiling
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An established maximum price that sellers may charge for a good/service
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Price Floor
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An established minimum price that buyers must pay for a good/service
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Minimum Wage
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Minimum legal price that an employer may pay a worker for one hour of work
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Rationing
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System in which the government allocates goods/services using factors other than price
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Black Market
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Term describing where goods/services are illegally bought and sold in violation of price controls or rationing
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Demand
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Willingness to buy a good/service and the ability to pay for it
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Law of Demand
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When prices go down, quantity demanded increases. When prices go up, quantity demanded decreases.
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Supply
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Willingness and ability of producers to offer goods/services for sale
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Law of Supply
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Law that states that producers are willing to sell more of a good/service at a higher price than they are at a lower price
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Elastic
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Term describing demand when the quantity demanded changes significantly as price changes
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Inelastic
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Term describing demand when the quantity demanded changes little as price changes
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Unit Elastic
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Term describing demand when the percentage change in price and quantity demanded are the same
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Regulation
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The act of controlling business behavior through a set of rules/laws
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