Price Ceiling
What is a price ceiling?
Maximum legal price that can be charged for product.
What is a price floor?
Minimum legal price a seller can sell a product.
What is a Market Economy?
Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets.
What is a Mixed Economy?
Market-based economic system with limited government involvement.
What is a Planned Economy?
Economic system in which the central government makes all decisions on the production and consumption of goods and services.
Does a price ceiling create a surplus or shortage?
Shortage
Does a price floor create a surplus or shortage?
Surplus
What is a key feature of a market economy?
Publicly owned businesses
List of Factors of Economic Growth
Human Capital
Capital Goods
Natural Resources
Entrepreneurship
Advantages of command economy
Can change direction drastically, health and public services are available at little or no cost
What is a downfall from price ceilings?
More illegal black market transactions.
What is a downfall to price floors?
An increase in prices for products and higher tariffs.
Examples of market economy
United States, Japan, South Korea, Australia, Great Britian
Disadvantage of mixed economy
higher costs for citizens
Example of Command Economy
Cuba and North Korea
What is Elasticity?
How sensitive quantity is to change in price.
Who does the government help by applying this?
Producers
Disadvantages of market economy
Rewards only productive products, not enough public goods
An economic system is the way a society organizes the ________, _________, and ___________ of goods and services.
production, distribution, consumption
Disadvantages of Centrally Planned Economy
Consumers own nothing, no choices/freedom, limited innovation by individuals
3 predications that can be made when applying this.
1. increase quantitiy demanded
2. decrease quantity supplied
3. create a market shortage
3 predictions when applying price floors
1. Qd will decrease
2. Qs will increase
3. surplus will emerge in market
In a market economy, who decides how to produce goods and services?
Private producers (businesses)
What are 3 other names for a market economic system?
Capitalism, laissez-faire system, and free enterprise system
Why do centrally-planned economies face problems of poor-quality goods and services and unhappy citizens?
Due to the little incentive to work harder