Exam 2 Flashcards
Excise Tax
Tax on specific item
Analyze price control
Why Changes to Equilibrium Efficiency Winners / Losers Unintended Consequences
Price Ceiling:
A price set (usually by the government) that won’t allow the price of a good or service to rise above a certain point.
Binding Price Ceiling:
A price ceiling set below the equilibrium point
Price Floor:
A price set (usually by the government) that won’t allow the price of a good or service to fall below a certain point.
Binding Price Floor:
A price floor set above the equilibrium point
A minimum wage that is set above a market’s equilibrium wage will result in
More quantity of labor supplied, meaning more laborers willing to work
When a binding price floor is imposed on a market to benefit sellers…
some sellers benefit, and some sellers are harmed
If a price ceiling is a binding constraint on a market, then…
buyers cannot buy all they want to buy at the price ceiling
Over time, housing shortages caused by rent control…
increase, because the demand for and supply of housing are more elastic in the long run
After the price ceiling becomes effective…
a smaller quantity of the good is bought and sold
When a binding price ceiling is imposed on a market to benefit buyers….
some buyers will not be able to buy any amount of the good
When a binding price ceiling is imposed on a market to benefit buyers….
some buyers will not be able to buy any amount of the good
When government imposes a price ceiling or a price floor on a market…
someone may become better off and someone may become worse off
Analyze Price Controls
Why? Equilibrium Changes Efficiency Winners/Losers Unintended Consequences
