Random
If the government wants to create tax revenues without generating any deadweight loss, what type of good should they tax?
a good with a perfectly inelastic demand
Suppose Alysha has a WTP of $59, Brandon has a WTP of $45, Claudia has a WTP of $35, Darren has a WTP of $25 and Jenelle has a WTP of $10 for a Georgia State Parking Pass. This is the quantity demanded for Georgia State Parking passes if the current market price is $24.
What is four Georgia State Parking passes
The tax base of this specific tax is income.
What is income tax?
The difference between the max price consumers are willing and able to pay for a good or service and the price they actually pay.
Consumer Surplus
If a seller has a willingness to accept of $6 and the market price is $10, then this represents the producer surplus.
What is $4?
If the government feels that the price in the market is too low for the ________, it can impose a ________.
What is consumers and price floor?
Suppose the market price in a market without taxes is $3. After taxes are imposed in this market, consumers end up paying $3.50 and sellers receive $2.75. The per-unit tax imposed in this market is equal to this value.
What is $0.75?
If the supply curve is relatively more inelastic than the demand curve, then the burden of a tax falls on this group.
Who are suppliers?
The difference between the price producers receive for a good or service and the minimum price they are willing and able to accept.
Producer Surplus
The area below the demand curve but above the current market price could be called this.
What is consumer surplus?
A price ceiling is not effective if it is...
What is set above the equilibrium price?
What formula is used to calculate elasticity? Write it down on the board.
Midpoint formula
((q2-q1/(q1+q2/2))/((p2-p1/(p1+p2/2))
The area defined by the difference between the price a consumer pays and the seller receives times the quantity sold is defined as this.
What are tax revenues?
The Price that both consumers and producers accept.
Equilibrium Price
When taxes are placed on goods, what does this cause?
What is deadweight loss?
When the government removes a binding price floor, what happens?
What is quantity demanded will increase and quantity supplied will decrease
If the price falls from 6 to 4, the quantity demanded rises from 8000 to 12000. Explain the meaning of this elasticity...
Elasticity= 1, this is unit elastic
Gasoline taxes and cigarette taxes are examples of this type of per-unit tax.
What are excise taxes?
This defines the lowest price at which a seller is willing to sell based on the costs of production.
Willingness to Accept
The fact that the market outcome allocates consumption and sales to those consumers and firms with the highest value implies that this outcome is this.
What is efficient?
The cross-price elasticity of demand of substitute goods is?
Always positive
How can the cross-price elasticity of demand be used to identify the relationship between two goods?
It determines whether or not they are substitutes or complements
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ________ and demand is described as ________.
What is .2; inelastic
Graphically, the producer surplus is defined by this area.
What is the area above the supply curve, but below the market price?
This defines the maximum price at which a potential buyer would buy a good or service.
What is willingness to pay?