140
the essentials of demand and supply
Movement along the supply curve The result of a change in the quantity supplied of a good or service. Price ceiling The maximum price that firms in an industry can charge for a good or service. Typically imposed by governments to achieve an objective perceived as socially desirable, price ceilings often result in inefficient economic, and social, outcomes. Price floor A legally imposed minimum price that may be charged for a good or service. Queuing A non–price rationing mechanism that involves waiting in line. Ration coupons Coupons or tickets that entitle the holder to purchase a given amount of a particular good or service during a given time period. Ration coupons are sometimes used when the price rationing mechanism of the market is not permitted to operate, as when, say, the government has imposed a price ceiling. Rationing function of price The increase or a decrease in the market price to eliminate a surplus or a shortage of a good or service. The rationing function is considered to operate in the short run because other demand determinants are assumed to be constant. Shift of the demand curve The result of a change in the demand for a good or a service. Shift of the supply curve The result of a change in the supply of a good or a service. Shortage The result that occurs when the quantity demanded of a good or a service exceeds the quantity supplied of that same good or service. Shortages exist when the market price is below the equilibrium (market clearing) price. Supply curve A diagrammatic illustration of the quantities of a good or service firms are willing and able to supply at various prices, assuming that the influence of other supply determinants remains unchanged. Surplus The result that occurs the quantity supplied of a good or a service exceeds the quantity demanded of that same good or service. Surpluses exist when the market price is above the equilibrium (market clearing) price. Waiting list A version of queuing.
CHAPTER QUESTIONS 3.1 Define and give an example of each of the following demand terms and concepts. Illustrate diagrammatically a change in each. a. Quantity demanded b. Demand c. Market demand curve