All Flashcards
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.
What is a price ceiling?
A maximum legal price set by the government.
What is a price floor?
A minimum legal price set by the government.
What is an excise tax?
A tax on each unit of a good or service produced.
What is tax incidence?
How the burden of a tax is divided between consumers and producers.
What is a market?
Where buyers and sellers interact.
What is a shortage?
Quantity demanded exceeds quantity supplied.
What is a surplus?
Quantity supplied exceeds quantity demanded.
What is deadweight loss?
Loss of economic efficiency when equilibrium is not achieved.
What is consumer surplus?
The difference between what a consumer is willing to pay and what they actually pay.
What is producer surplus?
The difference between what a producer is willing to accept and what they actually receive.
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.