Econ Ch 4 Flashcards
wage
price of labor
employment
quantity of labor
labor demand
firms demand labor
labor demand curve is downward sloping because as wage decreases, firms will want to employ more people
what happens to employment and wage of demand goes up and down
demand up, employment up, wage up
demand down, employment down, wage down
labor supply
workers supply labor
labor supply curve is upward sloping because as wage increases people will want to work more
what happens to employment and wage if supply goes up and down
supply up, employment up, wage down
supply down, employment down, wage up
the relationship between the demand for products and the demand for resources used to make those products
more demand, more labor needed
price floor, above and below equilibruim
a legally established minimum price buyers must pay for a good or resource
above equilibrium- surplus - excess supply - binding
below - nothing - non binding
price floor and minimum wage
increasing minimum wage, excess labor supply
hurts workers that need it most and only some are made better off at the expense of the other workers
price ceiling, above and below
a legally established maximum price sellers can charge for a good or resources
above equilibrium- nothing - non binding
below equilibrium- binding - creates a shortage (demand > supply)
price ceiling and post disaster markets
if they decrease the price, not everybody gets some because they get bought fast
keep the price high, allows more people to get ahold of it because not as many people will buy a lot
impact of a tax
A tax on a product will cause the supply curve to shift left by the amount of the tax
- Raises the price that buyers pay
- Reduces the amount sellers receive
- Reduces the quantity sold
- Increases government revenue
- Creates deadweight loss
look at graph on notes
deadweight loss
the loss to society from the loss of gains to trades that do not occur because a tax was imposed
tax incidence and depends on…
the way the burden of a tax is distributed among economic units
elasticity
who will the tax burden fall on
those who are relatively inelastic
if demand is more inelastic burden is for…
if supply is more inelastic the burden is for…
demand - burden for buyers
supply - burden for sellers
when will deadweight be lower
when taxes are places on goods that are relatively inelastic
average tax rate
ATR
the percentage of income paid in taxes
tax liability (tax) / taxable income
progressive tax
regressive tax
proportional tax
progressive - average tax rate rises when income rises
regressive tax - average tax rate falls when income rises
proportional - average tax rate is the same at all income levels
marginal tax rate
the additional tax liability a person faces divided by his or her additional taxable income
MTR = change in tax liability / change in taxable income
the laffer curve
a curve illustrating the relationship between the tax rate and tax revenue
subsidy
a payment the government makes to either the buyer or seller when a good or service is purchased or sold
