| A | B |
|---|
| Law of Supply | principle that producers will supply more of a product or service at higher prices butt less of a product or service at lower prices |
| profit motive | the desire to make money |
| supply curve | a graphic representation of a supply schedule, showing the relationship between the price of an item and the quantity supplied during a given time period, with all other things being equal |
| determinant of supply | a nonprice factor that influences the available supply of a good or a service |
| tax | a required payment to a local, state, or national government, usually made on some regular basis |
| quantity supplied | The amount of a good or service that producers are willing and able to sell at each particular price |
| regulations | rules about how companies conduct business--if these are strict, supply tends to decrease |
| supply | the quantity of goods and services tht producers are willing and able to offer at various possible prices during a given time period |
| subsidy | a payment of money or benefits to private businesses by the government |
| Determinants of Supply | nonprice factors that can shift the entire supply curve of a product instead of simplying changing the quantity supplied along the orignal supply curve |
| supply schedule | a tool that shows the relationship between the price of a good or service and the quantity that producers will supply |
| profit | the amount of money remaining after producers have paid all of their costs |
| List the Six Determinants of Supply | Prices of Resources, Government Tools, Technology, Competition, Prices of Related Goods, Producer's Ecxpectations |
| prices | serve as the main form of communication between producers and consumers in a free-enterprise market |
| market failure | a limitation of the price system |
| negative externality | when someone who does not make or consumer a product bears part of the cost of its production |
| black market | where goods are exchanged illegally at prices that are higher than officially established prices |
| price floor | a government regulation that establishes a minimum price for a particular goods |
| postive externality | when someone who does not sell or buy a product benefits from its production |
| surplus | situation where the quantity supplied exceeds the quantity demanded |
| rationing | system in which a government or other institution decides how to distribute a good or service |
| incentive | something that encourages you to behave in a particular way |
| shortage | situation where quantity demanded exceeds quantity supplied |
| public good | any good or service that is consumed by all members of a group |
| price ceiling | a government regulation that establishes a maximum price for a particular good |
| flexibility | the ability to deal with change |
| market equilibrium | situation where the quantity supplied and the quantity demanded for a product are equal at the same price |
| minimum wage | the lowest amount an employer can legally pay a worker for a job |
| The ____________allows consumer and producers to communicate with each other | price system |
| By encouraging participation in markets, the price system also increases the ___________ in those markets | choices |
| When a shortage exists in a market, prices will | rise |
| When a surplus exists in a market, prices will | fall |
| After a particularly good harvest, the government might set a price _________ or base price, for a crop so that farmers do not suffer huge loses | floor |
| A rent control is an example of a price | ceiling |
| Governments sometimes set prices to | protect producers and consumers from dramatic price swings |
| How do businesses respond to surpluses | by lowering their prices |
| How do businesses respond to shortages | by raising their prices |
| What are the three major limitations of the price system? | (1) prices don't always take into account all the costs and benefits of production - positive and negative externalities; (2)the price system doesn't assign the cost of public goods to all consumers. (3) the price system can be unstable. It has flexibility to react to many situations. If a natural disaster occurs, the flexibility can lead to economic instability |
