Chapter 6 Flashcards
What is a price ceiling/price cap?
A regulation that makes it illegal to charge more than a specified level.
What is a rent ceiling/rent cap?
A price ceiling/price cap that is applied to a housing market.
What if the rent cap is set above the equilibrium? Below?
It has no effect if above. Has a huge impact if set below.
What is search activity?
Time spent looking for someone to do business with.
What is a price floor?
A regulation that makes it illegal to trade at a price lower than a specified level.
What is minimum wage?
A price floor applied to a labour market.
What if the minimum wage is set above the equilibrium? Below?
Has huge effect if above. No effect if below.
What is tax incidence?
The division of the burden of a tax between buyers and sellers.
Perfectly inelastic demand tax? Elastic?
Buyers pay for the tax. Sellers pay for the tax.
Perfectly inelastic supply tax? Elastic?
Sellers pay for the tax. Buyers pay for the tax.
What is a production quota?
An upper limit to the quantity of a good that may be produced during a specified period.
What is a subsidy?
A payment made by the government to the producer.
