Chapter 6 Flashcards
Price Ceilings
Legal maximun on the price at which the good can be sold
Price Floor
Legal minimum on the price at which the good can be sold.
If a price ceiling is above the equilibrium price is _____________
Not binding, meaning that has no effect on the market
If the price ceiling is below the equilibrium price is ____________
Binding, meaning that it doesn’t allow the market to reach equilibrium
A binding price ceiling allows ____________
Shortage
If a price floor is below the equilibrium price is ____________
Not binding
If a price floor is above the equilibrium price is __________
Binding
A binding price floor causes a ________
Surplus
Government use taxes to ______________
Raise revenue
A tax affects the quantity sold and _______ and ________
-price paid
-price received
If the tax is collected from the sellers
-Supply decreases
-Price paid increases
If the tax is collected from the buyers
-Demand decreases
-Price paid increases
Tax Wedge
Difference between what the buyer pays and seller receives
Tax incidence
Manner in which the burden of tax is shared among participants in a market.
