disequilibrium
describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
equiulibrium
the point at which quantity demanded and quantity supplied are equal
excess demand
when quantity demanded is more than quantity supplied
excess supply
when quantity supplied is more than quantity demanded
Disequilibrium produces what two outcomes?
excess demand or excess supply
price ceiling
a maximum price that can be legally charged for a good or service
price floor
a minimum price for a good or service
rent control
a price ceiling placed on rent
minimum wage
a minimum price that an employer can pay a worker for an hour of labor
shortage
situation in which quantity demanded is greater than quantity supplied; also known as excess demand
search costs
the financial and opportunity costs consumers pay when searching for a good or service
What are the advantages of prices?
Prices as an Incentive (communicate whether goods are in short supply or readily available)
Prices as Signals
Flexibility
The Price System is “Free”
supply shock
a sudden shortage of a good
rationing
a system of allocating scarce goods and services using criteria other than price
black market
a market in which goods are sold illegally
spillover costs
costs of production that affect people who have no control over how much of a good is produced
