What are the differences between a price ceiling and a price floor?
A price ceiling is a maximum price, while a price floor is a minimum price. Ceilings cause shortages, floors cause surpluses.
What are the differences between an excise tax and a lump-sum tax?
An excise tax is per-unit, while a lump-sum tax is a fixed amount.
Compare the effects of elastic vs. inelastic demand on tax incidence.
Elastic demand: producers pay more. Inelastic demand: consumers pay more.
Compare the effects of elastic vs. inelastic supply on tax incidence.
Elastic supply: consumers pay more. Inelastic supply: producers pay more.
What is the difference between the price paid by consumers and the price received by producers after an excise tax?
The difference is the amount of the excise tax.
What is the difference between the intended and actual impact of rent control?
Intended: affordable housing. Actual: shortages, reduced quality.
What is the difference between the intended and actual impact of minimum wage?
Intended: higher wages. Actual: unemployment, reduced hours.
What is the difference between a market with a price ceiling and one without?
With: shortage, lower quantity. Without: equilibrium price and quantity.
What is the difference between a market with a price floor and one without?
With: surplus, lower quantity. Without: equilibrium price and quantity.
What is the difference between a market with an excise tax and one without?
With: higher price, lower quantity, deadweight loss. Without: equilibrium price and quantity.
In a price ceiling graph, what area represents deadweight loss?
The triangle formed by the original equilibrium and the new quantities.
In a price floor graph, what area represents deadweight loss?
The triangle formed by the original equilibrium and the new quantities.
In an excise tax graph, what does the shift in the supply curve represent?
The increase in production costs due to the tax.
In an excise tax graph, what area represents tax revenue?
The rectangle formed by the tax amount and the new quantity.
In an excise tax graph, what area represents consumer surplus?
The area below the demand curve and above the new price.
In an excise tax graph, what area represents producer surplus?
The area above the supply curve and below the price received by producers (after tax).
What does the vertical distance between the original and new supply curve represent?
The per-unit tax amount.
What does the new equilibrium represent on an excise tax graph?
The new price and quantity after the tax is imposed.
How does the steepness of the demand curve affect tax incidence?
A steeper (more inelastic) demand curve means consumers bear more of the tax.
How does the steepness of the supply curve affect tax incidence?
A steeper (more inelastic) supply curve means producers bear more of the tax.
How does a price ceiling below equilibrium affect the market?
It creates a shortage because quantity demanded exceeds quantity supplied.
How does a price floor above equilibrium affect the market?
It creates a surplus because quantity supplied exceeds quantity demanded.
How does an excise tax affect the supply curve?
It shifts the supply curve to the left, increasing production costs.
How does relatively elastic demand affect tax incidence?
Producers pay more of the tax burden.
How does relatively inelastic demand affect tax incidence?
Consumers pay more of the tax burden.
Rent control is an example of what?
A price ceiling.
Minimum wage is an example of what?
A price floor.
How does a non-effective price ceiling affect the market?
It has no effect; the market operates at equilibrium.
How does a non-effective price floor affect the market?
It has no effect; the market operates at equilibrium.
What is the effect of an excise tax on consumer surplus?
It reduces consumer surplus.
