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Ch.4 MacroEcon Terms
Terms in this set (25)
econ system in which relative prices are constantly changing to reflect changes in supply and demand for different commodities. prices of those commodities are signals to everyone within system as to what is relatively scarce and what is relatively abundant
act of trading, done on an elective basis, in which both parties to the trade expect to be better off after the exchange.
all of the costs associated with exchange, including the informational costs of finding out the price and quality, service record, and durability of a product, plus the cost of contracting and enforcing that contract
government-mandated minimum or max prices that may be charged for goods and services
legal max price that may be charged for a particular good or service
legal min price below which a good or service may not be sold.
all methods used to ration scarce goods that are price-controlled.
nonprice rationing devices
market in which goods are traded at prices above their legal max prices or in which illegal goods are sold
price ceilings on rent
wage floor, legislated by government, setting the lowest hourly rate that firms may legally pay workers
physical supply restriction on imports of a particular good, such as sugar.
When the _________ curve shifts outward or inward with an unchanged ____________ curve, equilibrium price and quantity increase or decrease, respectively. When the ___________ curve shifts outward or inward given an unchanged ______ curve, equilibrium price moves in the direction opposite to equilibrium quantity.
demand; supply; supply; demand
When there is a shift in demand or supply, the new equilibrium price is not obtained ___________. Adjustment takes ____________.
Prices in a market economy perform a rationing function because they reflect relative scarcity, allowing the market to clear. Other ways to ration goods include ______________, ________________, _____________, _________________, __________________, and ____________.
first come, first served; political power; physical force; random assignment; coupons; queuing
Even when businesspeople can change prices, some rationing by waiting may occur. Such _______ arisses when there are large changes in demand coupled with high costs of satisfying those changes immediately.
Governments sometimes impose price controls in the form of price ________ and price ________.
An effective price _________ is one that sets the legal price below the market clearing price and its enforced.
Effective price ________________ lead to nonprice rationing devices and black markets.
___________ prices perform three functions: (1) allocating existing scarce housing among competing claimants (2) promoting efficient maintenance of existing houses and stimulating new housing construction (3) rationing the use of existing houses by current demanders.
Effective rent ____________ impede the functioning of rental prices. Construction of new rental units is discouraged.
Rent ________ decrease spending on maintenance of existing ones and also lead to "housing gridlock".
These are numerous ways to evade rent controls. _______ is one.
With a price-__________ system, the gov't sets a minimum price at which, say, qualifying farm products can be sold. Any farmers who cannot sell at that price in the market can "sell" their surplus to the government. The only way a price-________ system can survive is for the government or some other entity to buy up the excess quantity supplied at the support price.
When a _________ is placed on wages at a rate that is above market equilibrium, the result is an excess quantity of labor supplied at that minimum wage.
Quantity restrictions may take the form of __________, which are limits on the quantity of specific foreign goods that can be brought into United States for resale purposes.