All Flashcards
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.
What is the impact of a price ceiling on market efficiency?
It reduces market efficiency due to deadweight loss.
What is the impact of a price floor on market efficiency?
It reduces market efficiency due to deadweight loss.
What is the impact of an excise tax on market efficiency?
It reduces market efficiency due to deadweight loss.
How does rent control affect the availability of housing?
It can lead to a shortage of available housing.
How does minimum wage affect employment?
It can lead to unemployment if set above the equilibrium wage.
What is a potential benefit of excise taxes?
They generate tax revenue for the government.
What is a potential drawback of excise taxes?
They create deadweight loss and reduce economic efficiency.
Does an excise tax reduce consumer surplus?
Yes, it reduces consumer surplus.
Does an excise tax reduce producer surplus?
Yes, it reduces producer surplus.
What happens to the size of deadweight loss when demand or supply is more elastic?
The deadweight loss from a tax is larger when demand or supply is more elastic.
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.