Econ Ch 4

Question 1

wage

Answer 1

price of labor

Question 2

employment

Answer 2

quantity of labor

Question 3

labor demand

Answer 3

firms demand labor

labor demand curve is downward sloping because as wage decreases, firms will want to employ more people

Question 4

what happens to employment and wage of demand goes up and down

Answer 4

demand up, employment up, wage up

demand down, employment down, wage down

Question 5

labor supply

Answer 5

workers supply labor

labor supply curve is upward sloping because as wage increases people will want to work more

Question 6

what happens to employment and wage if supply goes up and down

Answer 6

supply up, employment up, wage down

supply down, employment down, wage up

Question 7

the relationship between the demand for products and the demand for resources used to make those products

Answer 7

more demand, more labor needed

Question 8

price floor, above and below equilibruim

Answer 8

a legally established minimum price buyers must pay for a good or resource

above equilibrium- surplus - excess supply - binding

below - nothing - non binding

Question 9

price floor and minimum wage

Answer 9

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

Question 10

price ceiling, above and below

Answer 10

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)

Question 11

price ceiling and post disaster markets

Answer 11

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

Question 12

impact of a tax

Answer 12

A tax on a product will cause the supply curve to shift left by the amount of the tax

1. Raises the price that buyers pay
2. Reduces the amount sellers receive
3. Reduces the quantity sold
4. Increases government revenue
5. Creates deadweight loss

look at graph on notes

Question 13

deadweight loss

Answer 13

the loss to society from the loss of gains to trades that do not occur because a tax was imposed

Question 14

tax incidence and depends on…

Answer 14

the way the burden of a tax is distributed among economic units

elasticity

Question 15

who will the tax burden fall on

Answer 15

those who are relatively inelastic

Question 16

if demand is more inelastic burden is for…
if supply is more inelastic the burden is for…

Answer 16

demand - burden for buyers

supply - burden for sellers

Question 17

when will deadweight be lower

Answer 17

when taxes are places on goods that are relatively inelastic

Question 18

average tax rate

Answer 18

ATR

the percentage of income paid in taxes

tax liability (tax) / taxable income

Question 19

progressive tax
regressive tax
proportional tax

Answer 19

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

Question 20

marginal tax rate

Answer 20

the additional tax liability a person faces divided by his or her additional taxable income

MTR = change in tax liability / change in taxable income

Question 21

the laffer curve

Answer 21

a curve illustrating the relationship between the tax rate and tax revenue

Question 22

subsidy

Answer 22

a payment the government makes to either the buyer or seller when a good or service is purchased or sold