Questions and Answers
What are incentives?
What is a price ceiling?
What is a price floor?
What does it mean to produce?
Signup and view all the answers
If the demand for a good changes drastically when the price changes, the good is _____
Signup and view all the answers
If the demand for a good does not change much when the price changes, the good is _____
Signup and view all the answers
What does the bottom horizontal line represent on a graph in the context of price floors?
Signup and view all the answers
Which is an example of a product that is considered a need?
Signup and view all the answers
Which can be considered a negative incentive for producers?
Signup and view all the answers
What does the graph demonstrate regarding the relationship between amount produced and price?
Signup and view all the answers
In economics, if a good is inelastic, what does that imply?
Signup and view all the answers
A pair of stylish sneakers could be considered a _____ because it is not a necessity.
Signup and view all the answers
What does the top horizontal line represent on a graph in the context of price ceilings?
Signup and view all the answers
The lowest amount a manufacturer can pay factory workers is an example of _____
Signup and view all the answers
Goods that are considered to be needs tend to be _____ when the price changes.
Signup and view all the answers
A(n) _____ is a reward or punishment that encourages people to behave in certain ways.
Signup and view all the answers
Study Notes
Incentives
- Incentives are rewards or punishments that motivate individuals to perform specific actions or refrain from them.
Price Ceiling
- A price ceiling is defined as the maximum allowable price for a particular good or service, typically implemented to protect consumers.
Price Floor
- A price floor establishes a minimum price for goods or services to protect producers, ensuring they can cover costs.
Production
- To produce means to create goods or deliver services, forming the basis of economic activity.
Elastic Demand
- A good is considered elastic if its demand significantly changes in response to price fluctuations.
Inelastic Demand
- Inelastic goods exhibit minimal changes in demand despite variations in price, indicating less sensitivity to price changes.
Price Floor on Graph
- An effective price floor can be depicted on a graph as a horizontal line below the equilibrium price, illustrating market inefficiencies.
Necessity Products
- Breakfast food is an example of a necessity, classified as a good that consumers typically need regardless of price changes.
Negative Incentive for Producers
- A significant increase in production costs serves as a negative incentive for producers, potentially leading to decreased output.
Price Change Impact on Production
- A graph illustrating production levels reveals how quantity produced can vary dramatically with changes in price, indicating elastic supply.
Inelastic Goods Characteristics
- In economics, inelastic goods are those where either supply or demand does not significantly react to shifts in price, affecting market behavior.
Wants vs. Needs
- Stylish sneakers are considered a want, as they are not essential for survival, contrasting with needs which are vital for daily life.
Price Ceiling on Graph
- A price ceiling is represented on a graph as a horizontal line above the equilibrium price, which may lead to shortages in the market.
Minimum Wage as Price Floor
- The lowest permissible wage for factory workers exemplifies a price floor, ensuring minimum earnings for laborers.
Needs and Elasticity
- Goods classified as needs tend to be inelastic, meaning that even substantial price changes do not impact demand significantly.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz focuses on key concepts related to elasticity and incentives in economics. It provides definitions for important terms such as incentives, price ceiling, and price floor to enhance your understanding of economic principles. Ideal for students looking to reinforce their knowledge in economics.
