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ECON 1000 > CHAPTER 6 > Flashcards

CHAPTER 6 Flashcards

1
Q

What happens if prices are fixed below market clearing

A

Shortages develop (quality demanded greater than quantity supplied)

Consumers frustrated

Quantity sold = quantity supplied only

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2
Q

When prices are fixed above market clearing

A

There is a surplus ( quantity supplied greater than quantity demanded )

Quantity sold = quantity demanded only

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3
Q

What happens when governments fix prices

A

Smart choices of consumers and businesses are not coordinated and don’t function well.

Quantities adjust to whichever is less — quantity supplied or quantities demanded

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4
Q

Rent control and price ceiling

A

Example of price ceiling — maximum price set by government, making it illegal to charge a higher price

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5
Q

Costs of rent control

A

Like any fixed price rent control ruin coordinating forces of well functioning markets.

They are in Efficiency not and reduce total surplus

Housing shortage

Subsidizing well of tenants

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6
Q

Where is rent control fixed price set

A

Below the marketing clearing rent creating a shortage

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7
Q

Alternative to rent control

A

Government subsidies to help the poor pay rent and government supplied housing

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8
Q

Minimum wage law and price floor

A

Example of price floor — minimum price set by government, making it illegal to pay a lower price

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9
Q

Input markets

A

Businesses buy the inputs they need from households to produce products

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10
Q

Output markets

A

Businesses sell their products to households

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11
Q

How do governments interact in certain markets

A

They set the rules of the game

Interact in output markets with rent ceilings and input markets with minimum wages

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12
Q

Benefit of minimum wage

A

Political benefit less money spent

Government is doing something to help the working poor

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13
Q

What happens if governments set minimum wage above the market clearing price

A

The quantity supplied by households is greater than quantity of labour demanded by businesses
Creating unemployment

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14
Q

Costs of minimum wage law

A

Inefficiency in labour market

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15
Q

What is unemployment created by minimum wage dependent on

A

Elasticity of business demand for unskilled labour

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16
Q

When businesses have few substitutes

A

Demand for unskilled labour is inelastic a rise in wage produces a small response in decreased quantity demanded

17
Q

When businesses have a lot of substitutes for labour

A

Demand for labour is elastic
Rise in minimum wage produces a large decrease in quantity demanded

18
Q

Alternatives to minimum wage policy

A

Help working poor training programs and wage supplements

19
Q

If products produced are valued

A

The market is well functioning meaning outputs go to those most willing to pay

20
Q

Efficient market outcome

A

May not be fair or equitable

Deliver to those most willing to pay

Marginal cost of sellers matches marginal benefit of buyers

21
Q

Consumers who don’t buy at equilibrium

A

2 categories

1 . Marginal benefit is less than price —- doesn’t find the product worth the price

2 . Marginal benefit is greater than price —- can’t afford it but wants it

22
Q

Canadian healthcare

A

Consumers pay zero suppliers fixed by government

Results in shortages and inefficiencies

Quantity demanded exceeds quantity supplied

23
Q

Positive statement

A

Facts

24
Q

Normative statements

A

Value judgements

25
Q

Equal outcomes and equal opportunities

A

Everyone gets the same amount

Everyone has the same opportunities, but the outcomes can be different

26
Q

When prices are fixed

A

Quantities adjust to whatever is less

27
Q

Market clearing before incident

A

Quantity demanded equals quantity supplied

28
Q

When is there a price floor

A

When price is set above equilibrium price

29
Q

When is price ceiling

A

When price is set below equilibrium price

Horizontal line on graph

30
Q

Left leaning politician

A

Thinks equality of outcomes more important than equality of opportunity

31
Q

When a business exists an industry

A

Market clearing price rises

32
Q

Eliminating rent controls

A

Landlords create additional rental housing

Increase in rental units is largest when supply is elastic

33
Q

Price ceiling set above equilibrium price

A

Results in equilibrium price

34
Q

When governments fix below equilibrium price

A

Price ceiling
There is a shortage
Price control is effective
There is deadweight loss

ECON 1000 (12 decks)

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