How Prices Work

What role do prices play in decision-making?

• They discourage production and consumption

• They only affect consumer behavior, not producers

• They have no impact on market decisions

• They act as signals to buy or produce more or less of a product

How do prices help in the economy?

• By enforcing government regulations on production

• By limiting the amount of goods produced

• By answering WHAT, HOW, and FOR WHOM to produce

• By determining who gets to produce certain goods

How does the price system affect resource allocation?

• It prevents resources from being allocated efficiently

• It helps allocate resources within and between markets

• It only affects resource allocation within markets, not between them

• It has no impact on resource allocation

Which statement expresses a central idea of how the laws of supply and demand work?

• The government sets the prices for goods and services.

• Prices are determined by the interaction of producers and consumers.

• Consumers alone determine the prices for goods and services.

• Technology dictates the prices charged for goods and services.

A maximum price consumers are required to pay for a good or service.

• Price Ceiling

• Equilibrium

• Market Clearing Price

• Price Floor

A minimum price consumers are required to pay for a good or service.

• Price Ceiling

• Market Clearing Price

• Equilibrium

• Price Floor

example of a price floor is _____________.

• Minimum wage

• Gas prices

• Salaried jobs

• government Subsidies

What is a price floor?

• The maximum price that can be charged for a product

• The minimum price that can be charged for a product

• The average price of a product in the market

• The price set by the government for all products

What does this graph show?

• Shortage

• Surplus

• Supply Table

• Equilibrium

What is the Equilibrium Price?

• 1

• 2

• 3

• 4