PRICES and Decision Making

CH 6

·        Answer in complete sentences

·        Give your paper the same title as this paper

·        Total Points: 35 (Terms: 15 Ques.: 20)

·        Due Date: _____

State Standards Addressed:  (These are to show that I am teaching what California tells me to, these are not questions that you need to answer)

12.2.2 Discuss the effects of changes in supply and/ or demand on the relative scarcity, price, and quantity of particular products.

12.2.4 Explain how prices reflect the relative scarcity of goods and services and perform the allocative function in a market economy.

12.2.5. Understand the process by which competition among buyers and sellers determines a market price.

12.2.6 Describe the effect of price controls on buyers and sellers.

12.2.10 Discuss the economic principles that guide the location of agricultural production and industry and the spatial distribution of transportation and retail facilities.

KEY TERMS: 

• Define these key terms.  Each term is worth 1 point.
• The number in the parenthesis is the page it is located on

1. price                                                             9.    equilibrium price                              

2. rationing                                                        10.  price ceiling

3. ration coupon                                                 11.  minimum wage

4. rebate                                                          12.  price floor                 

5. economic model                                             13.  target price                

6. market equilibrium                                         14.  nonrecourse loan

7. surplus                                                          15.  deficiency payment                

8. shortage       

Questions (Each question is worth 2 points, unless specified otherwise)

1.      In a paragraph, describe the five advantages of using price as an allocating mechanism. (5 points)

2.      List three problems of allocating goods and services using nonprice-related methods.

3.      Explain shortages and surpluses and their role in competitive markets.

4.      In a paragraph, describe three causes of a price change in a market. (5 points)

5.      Explain why shortages and surpluses are not temporary when price controls are used.

6.      Identify and explain two programs that have historically been used to stabilize farm incomes.

7.      The book talks about "When Markets Talk" Explain what is the author means by the statement “talk.”