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ECON 201 > Review 4 Price Controls > Flashcards

Review 4 Price Controls Flashcards

1
Q

Price controls

A

government-mandated process that are generally imposed in the form of maximum or minimum legal prices

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2
Q

Rent control

A

price ceiling intended to protect residents from high housing prices

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3
Q

Effect of an increase in demand on price and quantity

A

both increase

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4
Q

Price floor

A

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

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5
Q

Price ceiling

A

A legally established maximum price sellers can charge for a good or resource.

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6
Q

Effect of a price floor

A

surpluses

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7
Q

Shortages

A

A condition in which the amount of a good offered for sale by producers is less than the amount demanded by buyers at the existing price. An increase in price would eliminate the shortage.

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8
Q

Surplus

A

A condition in which the amount of a good offered for sale by producers is greater than the amount that buyers will purchase at the existing price. A decline in price would eliminate the surplus

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9
Q

Effects of rent control

A
  1. Shortages and black markets develop
  2. The future supply of rental housing will decline
  3. The quality of rental housing will deteriorate
  4. Non-price methods of rationing will become more important–discrimination
  5. Inefficient use of housing space–low turnover
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10
Q

Effect of minimum wage on unskilled labor market

A
  1. Discrimination
  2. High unemployment rates
  3. Higher prices for consumers
  4. Loss of non-wage benefits
  5. Black markets
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11
Q

What would happen if the equilibrium price is $8 and a price ceiling of $5 is imposed?

A

shortage

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12
Q

What would happen if the equilibrium price is $8 and a price floor of $5 is imposed?

A

no effect

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13
Q

What would happen if the equilibrium price is $8 and a price floor of $10 is imposed?

A

surplus

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14
Q

What would happen if the equilibrium price is $8 and a price ceiling of $10 is imposed?

A

no effect

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15
Q

At a price of $9 (price floor), 14 widgets are supplied and 11 widgets are demanded. How much would it cost the government to buy up the surplus caused by the price floor?

A

(14-11)9=$27

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16
Q

Assume that price controls create a surplus of widgets. Given this price control, how would an improvement in widget technology affect the production of widgets?

A

increase

17
Q

Assume that price controls create a surplus of widgets. Given this price control, how would an improvement in widget technology affect the consumption of widgets?

A

no effect

18
Q

Assume that price controls create a surplus of widgets. Given this price control, how would an improvement in widget technology affect the size of the surplus of widgets?

A

increase

19
Q

Other than creating surpluses, what are effects of price ceilings?

A
  1. Discrimination
  2. Black markets
  3. Buyers wait-in-line
  4. Lower quality products
20
Q

What type of price control tends to lead to sellers discriminating against buyers?

A

Price ceilings

21
Q

What type of price control tends to lead to black markets?

A

Both

22
Q

What type of price control tends to lead to lower quality products?

A

Price ceilings

23
Q

What type of price control tends to lead to consumers waiting in line to buy a produce?

A

Price ceilings

24
Q

What type of price control tends to lead to buyers discriminating against sellers?

A

Price floors

25
Q

Is the surplus caused by government price controls larger if demand in the market is elastic or inelastic?

A

elastic

26
Q

Is the shortage caused by government price controls larger if demand in the market is elastic or inelastic?

A

elastic

27
Q

Is the surplus caused by government price controls larger if supply in the market is elastic or inelastic?

A

elastic

28
Q

Is the shortage caused by government price controls larger if supply in the market is elastic or inelastic?

A

elastic

29
Q

How does a price ceiling affect the amount of producer surplus in a market?

A

decreases it

30
Q

How does a price floor affect the amount of consumer surplus in a market?

A

decreases it

31
Q

Predatory pricing

A

the pricing of goods or services at such a low level that other suppliers cannot compete and are forced to leave the market

32
Q

Price collusion (price fixing)

A

An agreement among competitors to raise, lower, maintain, or stabilize prices or price levels

33
Q

Price gouging

A

The practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair.

ECON 201 (8 decks)

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