Econ unit 2 test

What is equilibrium price?

• the lowest legal price – creates a surplus

• the highest legal price – creates a shortage

• designed to make money for the government.

• the price at which supply meets demand

What does it mean when there is a shortage?

• there is more demand than supply

• there is more supply than demand

• Our supply of natural resources is finite.

• Spending all of your money on that new iPhone and not having enough left over to get groceries.

What is a price ceiling?

• the lowest legal price – creates a surplus

• the highest legal price – creates a shortage

• The lowest customers are willing to pay for a product.

• The highest price customers are willing to pay for a product.

What is demand?

• I need to pay the bills... but Imma go to Disneyland instead.

• The value, or worth, that we place on a product.

• the amount of something that producers will offer for sale at all prices.

• the desire, ability, and willingness to buy a product

What is absolute advantage?

• "Unlimited power!"

• The producer that can produce the most output OR requires the least amount of inputs (resources).

• The producer with the lowest opportunity cost.

• The currency with the highest value in the foreign market.

What is supply?

• The amount of money you are willing to supply to get that new iPhone.

• Illustrates how the quantity that a person will demand varies depending on the price of a good or service

• The amount of resources available to make a product.

• The amount of something that producers will offer for sale at all prices.

Define price floor.

• The highest legal price – creates a shortage

• The lowest legal price – creates a surplus.

• The lowest price people are willing to pay for an item.

• The lowest price producers are willing to set for an item.

What is surplus?

• There is more demand than supply.

• The quantity demanded of a good or service varies inversely with its price.

• Occurs when companies create false scarcity to sell an item.

• There is more supply than demand.

Describe the Law of Demand.

• The quantity demanded of a good or service varies inversely with its price.

• Producers (businesses) will offer more for sale at higher prices.

• "If you build it, they will come."

• The more producers charge for an item, the higher demand will be.

in 2000, Firestone Tire Co was in the news for faulty tires installed on factory Ford cars causing multiple wrecks. The (decrease/increase) in demand is a result of ____________.

• increase; price

• Decrease; price

• Increase; a non-price determinant

• Decrease; a non-price determinant