Chapter 5 Flashcards
Price Controls
legal restrictions on how high/low a market price may go
Price Ceiling
Max price sellers are allowed to charge for a good/service
Price Floor
min price buyers are required to pay for good/service
Deadweight Loss
The loss in total surplus that occurs whenever an action/policy reduces quantity transacted below equilibrium quantity.
Wasted Resources
ppl expend money, effort, and time
Quantity Control/ Quota
The upper limit on the quantity of some good that can be bought/sold
Quota Limit
Total amount of good that can be legally transacted
License
Gives its owner the right to supply a good
Demand Price
The price at which consumers will demand a given quantity.
Supply Price
The price at which producers will supply a certain quantity.
Wedge
The wedge between demand price and supply price and other costs
-price paid by buyer>money received by seller
Quota Rent
Earnings that go to license-holder from ownership of right to sell that good
-equals market price of license when licenses are traded
