Price Controls And Markets Flashcards
Price ceiling
Maximum price sellers are allowed to charge for a good or service
Price floor
Minimum price buyers are required to pay for a good or service
Deadweight loss
Loss in total surplus that occurs whenever an action or a policy reduces the quantity transacted below the efficient market equilibrium quantity
Inefficient allocation to consumers
Some people who want the good badly and are willing to pay a high price don’t get it and some people who don’t care much and aren’t willing to pay much do get it
Wasted resources
People expend money, effort and time to cope with the shortages are caused by the price ceiling
Inefficiently low quality
Sellers offer low-quality goods at a Low price even though buyers would prefer a higher quality at a higher price
Black market
Goods or services are bought and sold illegally - either because it is illegal to sell them at all or because the prices charged are legally prohibited by a price ceiling
Minimum wage
Legal floor on the wage rate, which is the market price of labour
Inefficient allocation of sales among sellers
Sellers who are willing to sell at the lowest price are unable to make sales go to sellers who are only willing to sell a higher price
Inefficiently high quality
Sellers offer high-quality goods at a high price, even though buyers would prefer a low quality at a lower price
Quantity control/quota
Upper limit on the quantity of some good that can be bought or sold. The total amount of the good that can be legally transacted is the quota limit.
License
Gives its owner the right to supply a good
Demand price
Price at which consumers will demand that quantity
Supply price
Price at which producers will supply that quantity
Wedge
Between demand price and supply price - the price paid by buyers ends up being higher than that received by sellers
