Chap 5: Applications of DD,SS& Elasticity In The Good Market Flashcards
What is specific tax?
It is fixed amount of tax per unit of the commodity
What is ad valorem tax
It is calculates as a percentage of sales price of the commodity
What is a quota?
It is an upper limit on the quantity of a good that can be bought or sold.
What are the effects of quota?
- keep quantity of good at a level that is socially acceptable (referring to goods that have undesirable effects)
- prevent the depletion of scarce resources
What are the other policies to reduce consumption and production
-moral suasion which can be done through campaigns
-other regulations e.g ban
What is a subisidy?
It is a form of financial aid or support extended to firms or consumers with aim of promoting an economic objective.
Define price ceiling
Price ceiling is a legally established maximum price that is set below the equilibirum price
What are the objectives of price ceiling
- keep prices of certain goods affordable
- to prevent exploitation by suppliers who may charge high prices in times of shortages especiallt during war or famine.
Define price floor
Price floor is a legally established minimum price that is set above the market equilibrium price
What is minimum wage?
A minimum wage is the lowest wage producers can legally pay their workers. It is a regulation aimed at ensuring workers earn a certain level of income for their daily needs and needs to be set above the equilibrium wage rates to be effective.
Define labour supply
It is defined as the amount of labour that people are able and willing to provide at the given wage, ceteris paribus
Factors affecting labour demand
- changes in demand and supply of goods and services
- productivity of labour
- technology
- changes in price of other factor inputs
- government policies
