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Chapter 4 terms 101 - – upper limits placed on price of...

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Price System - Market System - Supply and Demand Rationing Function of Prices - synchronization of decisions by buyers and sellers that leads to equilibrium. Voluntary exchange - acts of trading between individuals that make both parties to a trade subjectively better off. Transaction Costs - All of the costs associated with exchange, including informational cost plus the costs of negotiating and enforcing contracts and of acquiring and processing information about alternatives. The Role of Middlemen - They specialize in lowering transaction costs by bringing buyers and sellers together. Price Ceiling
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Unformatted text preview: – upper limits placed on price of goods or services. Shortage -A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price. Price floor – a minimum price below which a good or service may not be sold. Surplus - A situation where quantity supplied is greater than quantity demanded at a price above the market clearing price. Minimum wage- is the smallest amount of money per hour that an employer may legally pay a worker. Black-market- a market in which the price controlled good is sold at an illegally high price. Ch 4...
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