unit 2: supply Flashcards
1
Q
price:
A
the monetary value of a product
2
Q
why are prices important:
A
- signals about the economy
- high prices tell buyers to buy less and producers to produce more
- low prices tell buyers to buy more and producers to produce less
3
Q
tug of war:
A
sellers want more, buyers want it for less
4
Q
what if we didn’t have prices:
A
- we could only trade for goods
> too much bartering - governmental rationing
> government tries to be fair to everyone by giving everyone same amount
> not everyone needs same amount - abuse of power
5
Q
to set a price we need ___ and ___
A
supply; demand
6
Q
equilibrium price:
A
where quantity supplied equals demand
7
Q
equilibrium quantity:
A
where quantity demanded equals supply
8
Q
where the supply and demand graph intersect:
A
equilibrium
9
Q
surplus:
A
quantity supplies greater than demand
> too many goods
10
Q
shortage:
A
quantity supplied is less then the demand
> not enough goods
11
Q
in a true, free enterprise economy nothing is ___
A
controlled
12
Q
US has a ___ free enterprise economy
A
modified
13
Q
price ceiling:
A
- the highest legal price at a product can be sold
- often causes shortage of goods
14
Q
price floor:
A
- the lowest legal price a product can be
- often causes excess of goods
