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ECON101 > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

A government regulation that makes it illegal to charge a price higher than a specific level

A

Price ceiling/ price cap

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2
Q

Equilibrium price

A

quantity demand = quantity supplied

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3
Q

A price ceiling set _____ the equilibrium price has no effect on the market

A

above

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4
Q

A price ceiling set ______ the equilibrium has powerful effect on the market

A

below

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5
Q

When a price ceiling is applied to the housing market it is called

A

rent ceiling

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6
Q

A rent ceiling set below the equilibrium creates:

A
  • A housing shortage
  • Increased search activity
  • A black market
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7
Q

The time spend looking for someone with whom to do business is called

A

Search activity (checking alternatives available before making a choice.

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8
Q

Opportunity cost

A

potential benefits or loss that a business or an individual consumer misses out on when choosing one alternative over another. (The value of option not taken)

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9
Q

The opportunity cost of housing is equal to

A

rent + time spend on search activity

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10
Q

A rent ceiling controls only the ____ proportion of the cost of housing

A

rent

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11
Q

An illegal market in which equilibrium price exceeds the price ceiling

A

Black market

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12
Q

Scalper

A

A person who buys large quantities of in-demand items, and sell them to make profit

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13
Q

The level of the black market depends on the price ceiling, loose enforcement black market price is close to _______. With strict enforcement, market rent is equal to _______ price a consumer is willing to pay.

A

unregulated (rent), maximum

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14
Q

Deadweight loss

A
  • Value of trades that doesn’t occur because of tax
  • supply and demand are not in equilibrium
  • leads to market inefficiency
  • often because of tax (the government does not earn the revenue)
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15
Q

Market inefficiency

A

occurs when goods within the market are either overvalued or undervalued

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16
Q

Producer surplus

A

difference between the price producers sell the product and the minimum price they accept to sell the product

  • surplus comes from what they earn from selling products beyond their minimum price
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17
Q

Consumer surplus

A

difference between the price consumers are willing to pay and what they actually have to pay.

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18
Q

Full loss from rent ceiling =

A

deadweight loss + increased cost of search

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18
Q

When rent is not permitted to allocate scarce housing, some possible mechanics (unfair) are:

A
  • Lottery
  • first come first serve
  • discrimination
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18
Q

Anything that blocks voluntary exchange is unfair

A

fair-rules

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18
Q

A method that allocates resources based on views and self-interest of the owner

A

discrimination

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19
Q

the fairest outcome is allocating resources (scarce housing) to the poorest is a result of what rule

A

fair-result view

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19
Q

The lower the wage rate, the greater the quantity of labour ________

A

Demanded

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19
Q

A method that allocates resources to the luckiest

A

lottery

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19
Q

Market that influence the jobs we get and wages we earn

A

Labour market

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20
Q

The ______ the wage rate, the greater the quantity of labour supplied

A

higher

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21
Q

A government regulation that makes it illegal to charge a price lower than a specific level

A

price floor

22
Q

A price floor set _____ the equilibrium price has no effect on the market

A

lower

23
Q

A price floor set _____ the equilibrium price has powerful effect on the market

A

higher

24
Q

A price floor applied to a labour market

A

Minimum wage

25
Q

Minimum wage brings __________

A

unemployment

26
Q

A minimum wage set above the equilibrium wage results in a ________

A

surplus of labour

27
Q

According to both views of fairness, it minimum wage fair?

A

No
- unfair result, unfair rule

28
Q

The minimum wage is unfair because:

It imposes an unfair rule because:

A
  • only those who have a job and continue to work receive the minimum wage
  • increase job search activity

-blocks voluntary exchange
- companies are willing to hire more, people are willing to work more

29
Q

In labour market, the ______ measures the worker’s marginal social cost of labour.

A

supply curve

30
Q

______ of demand and supply determines who pays the tax

A

Elasticity

31
Q

The division of burden of a tax between buyers and sellers is called

A

Tax incidence

32
Q

If the price paid by buyers rises by the full amount of the tax, the burden of tax _______

A

falls entirely on the buyer

33
Q

If the price paid by buyers rises by a lesser amount than the tax, the burden of tax _______

A

falls partly on both buyers and sellers

34
Q

If the price paid by buyers doesn’t change, the burden of tax _______

A

falls entirely on the seller

35
Q

True or false : Tax incidence depends on the tax law

A

False, Tax incidence does not depends on the tax law

36
Q

Tax result in

A

inefficient underproduction

37
Q

Perfectly inelastic demand means

A

buyers pay

38
Q

perfectly elastic demand means

A

sellers pay

39
Q

Total loss of minimum wage =

A

deadweight loss + increased cost of job search

40
Q

A tax on buyers decreases ________, and shifts demand curve ________

A

demand, leftwards

41
Q

Perfectly inelastic is a _______ line on the graph (demand curve)

A

vertical

42
Q

perfectly elastic is a ________ line on the graph (demand curve)

A

horizontal

43
Q

There is underproduction and deadweight loss when it is a perfectly _____ demand

A

elastic

44
Q

Economists propose two conflicting principles of fairness to apply to a tax system:

A

 The benefits principle
 The ability-to-pay principle

45
Q

The principle that people should pay taxes equal to the benefits they receive from the services provided by the government.

A

The benefits principle
- it is fair because people with more benefits pay most taxes

46
Q

A principle that people should pay taxes according to how easily they can bear the burden of the tax.

A

The ability-to-pay principle
- justifies high rates of income tax on high incomes. (rich pays more)

47
Q

Perfectly inelastic supply means

A

seller pays

48
Q

Perfectly elastic supply means

A

buyers pay

49
Q

More elasticity the supply, the larger is the amount of tax paid by the ______

A

buyers

50
Q

More inelasticity the demand, the larger is the amount of tax paid by the ______

A

buyers

51
Q

protection quota

A

Limit of quantity of goods

52
Q

intervention in markets for farm products takes two main forms:

A

 Production quotas
 Subsidies

53
Q

subsidy

A

A payment made by the government to a producer.

54
Q

A production quota set below the equilibrium quantity has big effects including the following:

A
  • A decrease in supply
  • A rise in price
  • A decrease in marginal cost
  • Inefficient underproduction
  • An incentive to cheat and overproduce
55
Q

A subsidy has effects such as:

A
  • An increase in supply
  • A fall in price
  • An increase in marginal cost
  • Inefficient overproduction
56
Q

Marginal social benefit is equal to the market price is due to what case

A

subsidy

57
Q

All the things you can afford to buy

A

consumption possibilities

58
Q

The choices you make as a buyer of goods and service

A

Consumption choices

59
Q

Consumption choices are influenced by two factors:

A
  • Consumption possibilities
  • preferences

ECON101 (4 decks)

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