When Governments Intervene in Markets Flashcards
When demand is PED<1 and S is PES>1, who bares a higher proportion of the tax economic burden?
Consumers
When demand is PED>1 and S is PES<1, who bares a higher proportion of the tax economic burden?
Producers
What is a subsidy?
Government grant to those who. make a particular choice
What is price ceiling? (max)
a legally imposed price for a good that the suppliers cannot charge above
What is a price floor? (min)
a legally imposed price at which the price of the good cannot go below
What does the imposition of a maximum price mean?
excess demand, QD-QS represents that proportion
What does the imposition of the minimum price mean?
excess supply, QS-QD
What externalities do max and mina prices target?
Positive and negative
What does max and mina prices allow? respectively
Max - prevents monopolies from exploiting customers
Min - price increases to raise socially optimum output and discourage consumption
What is a quantity regulation?
a min or max quantity that can be sold
What is a mandate?
a requirement to buy or sell a minimum amount of a good
What is a quota?
puts a limit/cap on the maximum quantity of a good that can be sold
