Chapter 6: Prices

Flashcards covering key vocabulary related to prices and their effects in the economy.

Market Clearing Price

The price that balances the amount between sellers and buyers, also known as Equilibrium Price.

Equilibrium Point

The level at which the quantity supplied equals the quantity demanded.

Shortage

A situation where the demand for a product exceeds its supply.

Surplus

A condition where the supply of a product exceeds the demand for it.

Price Ceiling

A maximum legal price that can be charged for a product, which benefits consumers.

Price Floor

The lowest legal price that can be paid for a good or service, often set to protect producers.

Neutral Prices

Prices that do not favor either consumers or producers in a competitive market.

Flexible Prices

Prices that can adjust according to unexpected events or changes in the market.

Rationing

A system used to allocate goods when there are no prices, often leading to administrative costs and dissatisfaction.

Law of Supply & Law of Demand

Two fundamental economic principles that describe how the quantity of goods supplied and demanded relate to price.