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Economics Test 2

Equilibrium
The point at which quantity demanded and quantity supplied are the same
Search Cost
The financial and opportunity cost consumers pay in searching for a good or service
Rationing
A system of allocating scarce goods and services by criteria other than price
Supply Shock
A sudden drop in the supply of a good
Surplus
Any situation in which quantity supplied exceeds quantity demanded
Shortage
Any situation in which quantity demand exceeds quantity supplied
Price Floor
A government-mandated minimum price that must be paid for a good or service
Subsidy
A government payment that supports a business or market. These cause the supply of a good to increase.
Excise Tax
This is a tax on the production or sale of a good. It typically reduces the supply of the good.
Regulation
This occurs when the government steps into a market to affect the price, quantity, or quality of a good. This usually raises costs.
Variable
A factor that can change
Quantity Supplied
How much of a good is offered for sale at a specific price
Market Supply Schedule
Relationship between price and total quantity supplied by all firms
Elasticity of Supply
A measure of how suppliers react to a change in price
Inelastic
A product or service that takes a long time to produce
Elastic
A product or service that takes a short time to produce
Price Cap
Legal maximum that can be charged for a good or service
Fad
A product that reflects the impact of advertising and consumer taste on consumer behavior
Disequilibrium
When quantity supplied is not equal to quantity demanded

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