Macroeconomics Chapter 6 Vocabulary
Occurs when the quantity demanded and the quantity supplied at a particular price are equal.
The price at which the quantity demanded and the quantity supplied are equal.
The result of the quantity supplied being greater than the quantity demanded.
The result of quantity demanded being greater than quantity supplied.
Occurs when quantity demanded and quantity supplied are not in balance.
Occurs when producers sell products at lower prices to lure customers away from rival producers, while still making a profit.
What are the four characteristics of the price system in a market economy?
1. It is neutral
2. It is market-driven
3. It is flexible
4. It is efficient
1. It is neutral.
Prices do not favor either the producer or the consumer because both make choices that help to determine the equilibrium price. The free interactions of consumers (who favor lower prices) and producers (who favor higher prices) determines the equilibrium price in a market.
2. It is market-driven.
Market forces, not government policy, determine prices. In effect, the system runs itself.
3.It is flexible.
When market conditions change, so do prices.
4. It is efficient.
Resources are allocated efficiently since prices adjust until the maximum number of goods and services are sold.
Encourages people to act in certain ways
The legal maximum price that sellers may charge for a product.
The legal minimum price that buyers must pay for a product.
The legal minimum amount that an employer must pay for one hour of work.
A government system for allocating goods and services using criteria other than price.
Involves illegal buying or selling in violation of price controls or rationing.