Principle 4. People respond to incentives

Question 1

Incentive

Answer 1

Something that induces (causes) a person to act.

Question 2

Disincentive

Answer 2

Something that discourages someone from acting.

Question 3

Supply

Answer 3

A situation in which a quantity demanded is greater than the quantity supplied.

Question 4

Demand

Answer 4

a consumer’s desire to purchase goods and services and willingness to pay a specific price for them

Question 5

Price ceiling

Answer 5

keeps a price from rising above a certain level

Question 6

Price floor

Answer 6

lowest legal price that can be paid in a market for goods and services

Question 7

Equilibrium/market price

Answer 7

A situation in which the market price has reached the level at which quantity supplied equals quantity demand.

Question 8

Elasticity

Answer 8

method of measuring the likelihood of one economic factor affecting another

Question 9

Price signals

Answer 9

a change in the price of goods or services that indicates that the supply or demand should be adjusted (ex: price affects consumer demand)

Question 10

Shortage

Answer 10

a condition where the quantity of a product or service demanded is greater than the quantity supplied at the market price

Question 11

Surplus

Answer 11

A situation in which the quantity supplied is greater than the quantity demanded. There is a leftover of excess supply.