Robert H. Frank,
Cornell University
Ian C. Parker,
University of Toronto
| Allocative function of price | The process whereby price acts as a signal that guides resources away from the production of goods whose prices lie below cost toward the production of goods whose prices exceed cost.
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| Black market | An illegal market, set up to facilitate transactions prohibited by law.
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| Excess demand | The amount by which quantity demanded exceeds quantity supplied.
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| Excess supply | The amount by which quantity supplied exceeds quantity demanded.
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| Law of demand | The empirical observation that when the price of a product falls, people demand more of it.
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| Law of supply | The empirical observation that when the price of a product rises, firms offer more of it for sale.
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| Price ceiling | Government-fixed maximum price that can be charged for a good.
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| Price support | Program where the government sets a minimum (floor) price for a good and guarantees to purchase the good at that price.
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| Rationing function of price | The process whereby price directs existing supplies of a product to the users who value it most highly.
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| Real price of a product | Its price relative to the prices of other goods and services.
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2002 McGraw-Hill Higher Education