econ final elzenga section 4

Question 1

Supply:

Answer 1

refers to the schedule of quantities a seller is will to sell per unit of time at various prices, other things constant

Question 2

Quantity supplied:

Answer 2

refers to a specific amount that will be supplied at a specific price;

Question 3

Positive Supply Shift

Answer 3

Advances in technology

Price of inputs decreases

Positive expectations

Subsidies or tax breaks for production

Question 4

Negative Supply Shift

Answer 4

Natural disasters (usually weather related)

switch to a different preference

Price of inputs rises

Negative expectations

Taxes on production

Question 5

Market Supply Curve:

Answer 5

the horizontal sum of all individual supply curves

Question 6

Excess supply (Surplus):

Answer 6

quantity supplied is greater than quantity demanded; causes a movement to equilibrium on both supply and demand sides; Space between supply and demand curve above equilibrium

Question 7

Excess demand (shortage):

Answer 7

quantity demanded is greater than quantity supplied; prices tend to rise; Space between supply and demand curve below equilibrium

Question 8

Fallacy of composition:

Answer 8

the false assumption that what is true for a part will also be true for the whole

Question 9

Price ceiling:

Answer 9

a government imposed limit on how high a price can be charged; generally below the equilibrium price; creates an excess in demand (shortage)

Question 10

Rent control:

Answer 10

a price ceiling on rents, set by government

Question 11

Non-price rationing:

Answer 11

with price ceilings, existing goods are no longer rationed entirely by price, so other methods are needed

Question 12

Key Money:

Answer 12

black market payment for a rent-controlled apartment; discrimination usually occurs too

Question 13

Price floor:

Answer 13

government-imposed limits on how low a price can be charged; generally above the existing price; ex. Minimum wage

Question 14

Excise tax:

Answer 14

a tax that is levied on a specific good; when applied to suppliers, shifts the entire supply curve up by the amount of the tax, but at a price equal to the original price plus the tax, there is an excess in supply so the price of the good rises by less than the tax

Question 15

Tariff:

Answer 15

an excise tax on an imported good; don’t just hurt the foreign producers, they also cause cost increases domestically

Question 16

Third-party payer market:

Answer 16

the person who receives the good differs from the person paying for the good; equilibrium quantity and total spending are much higher