Chapter 6

Question 1

Price Ceiling

Answer 1

A legal maximum on the price at which a good can be sold.

Question 2

Binding Price Ceiling

Answer 2

Cann create shortages if equilibrium price is higher than price ceiling.

Question 3

Price Floor

Answer 3

A legal minimum on the price at which a good can be sold.

Question 4

Binding Price Floor

Answer 4

ineffective if price is below equilibrium and more effective but can create surplus if above equilibrium.

Question 6

Non-binding Price Floor

Answer 6

ineffective if price is below or above equilibrium.

Question 7

Evaluating price controls

Answer 7

Question 8

Tax incidence

Answer 8

Tax incidence is the study of who bears the burden of taxation.

For example, when government levies a tax on a good, the tax incidence determines the degree to which buyers and sellers will be worse off.

Question 9

Study a tax on sellers

Answer 9

Question 10

Study a tax on buyers

Answer 10

Question 11

How taxes affect market outcomes

Answer 11

Question 12

Elasticity and Tax Incidence

Answer 12

Elasticity and Tax Incidence

Question 13

Elasticity and tax incidence 2

Question 14

Subsidy

Answer 14

Question 15

A subsidy to sellers

Answer 15

Question 16

How subsidies affect market outcomes

Answer 16

Question 17

Who benefits from the First Home Owner Grant scheme?

Answer 17

Note: If supply demanded is elastic, the buyers will receive more benefits.