Chapter 6 Economics: Demand, Supply and Prices

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Miramonte High School; Mr Hunter Period 3

market equilibrium

occurs when the quantity demanded and the quantity supplied at a particular price are equal

equilibrium price

the price at which the quantity demanded and supply are equal

surplus

the result of quantity supplied being greater than quantity demanded

shortage

the result of quantity demanded being greater than quantity supplied

disequilibrium

occurs when quantity demanded and quantity supplied are not in balance

competitive pricing

occurs when producers sell products at lower prices to lure customers away from rival producers, while still making a profit

incentive

encourages people to act in certain ways

price ceiling

the legal maximum price that sellers may charge for a project

price floor

a legal minimum price that buyers must pay for a product

minimum wage

a legal minimum amount that an employer must pay for one hour of work

rationing

a government system for allocating goods and services using criteria other than price

black market

involves illegal buying or selling in violation of price controls or rationing

4 Characteristics of Price System

1. Neutral
2. Market driven
3. Flexible
4. Efficient

2 Advantages of the Price System for Producers

1. Information
2. Motivation

Michael Dell

- Dell computers
-cut costs by cusotm-making computers

Office of Price Administration

Started in 1941 during WW2 to ration scarce goods

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