chapter 6(supply demand and govt policies)

Question 1

price ceiling

Answer 1

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

Question 2

price floor

Answer 2

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

Question 3

a price ceiling that is not binding

Answer 3

• price ceiling is above the equilibrium price

- this has no effect on the price of quantity sold

Question 4

price ceiling that is binding

Answer 4

• price ceiling is below equilibrium price
• quantity demanded exceeds the quantity supplied, causing a shortage in supply
• leads to long lines, biased, etc..

Question 5

price floor that is not binding

Answer 5

• price floor is below equilibrium price

- price floor has no effect on price of quantity

Question 6

price floor that is binding

Answer 6

• price floor is above the equilibrium price

- this causes a surplus in supply

Question 7

tax incidence

Answer 7

the manner in which the burden of a tax is shared among participants in a market

Question 8

if a tax is put on sellers of a product, who pays for it

Answer 8

-the buyers and sellers, because it shifts supply left, causing a smaller quantity sold and higher price

Question 9

who gets the higher burden of the tax

Answer 9

whoever is less elastic

Question 10

is the supply or demand for labor more elastic

Answer 10

demand

Question 11

who has the highest burden of a luxury tax

Answer 11

suppliers

-because demand is very elastic for luxury goods

Question 12

what is the overall effect of a tax on a market

Answer 12

the size of the market shrinks

Question 13

a tax drives a wedge between__and___

Answer 13

• the price buyers pay

- price sellers recieve