Vocabulary
A legal maximum on the price at which a good can be sold
What is minimum wage an example of?
What is a price floor?
Do governments use taxes to raise revenue for public or private projects?
What are public projects?
Ex.- roads, schools, and national defense
Do economists tend to support or oppose price control?
What is oppose?
Economists believe that prices are the result of millions of business and consumer decisions that lie behind the supply and demand curves. Prices have the crucial job of balancing supply and demand.
A legal minimum on the price at which a good can be sold
What is a price floor?
What is rent control an example of?
What is a price ceiling?
Do taxes encourage or discourage market activity?
What is discourage?
When a good is taxed, the quantity of the good sold is smaller in the new equilibrium.
Who are price controls often aimed at helping?
Who are the poor?
The lowest wage that firms may pay workers
What is minimum wage?
Does a binding price ceiling cause a surplus or a shortage?
What is a shortage?
Does a tax on sellers shift the supply curve upward or downward?
What is upward?
The tax on sellers raises the cost of producing and selling a good, therefore it reduces the quantity supplied at every price.
Do price controls often help or hurt the poor?
What is hurt?
When the local government places a ceiling on rents that landlords may charge their tenants
What is rent control?
If a price ceiling is above the equilibrium price is the price ceiling binding or not binding?
What is not binding?
Does a tax on buyers shift the demand curve upward or downward?
What is downward?
The tax on buyers makes buying a good less desirable, therefore buyers demand a smaller quantity of the good at every price.
Do minimum wage laws lead to more employment or unemployment?
What is unemployment?
The price floor leads to a surplus of workers, therefore more people are unemployed.
The manner in which the burden of a tax is shared among participants in a market
What is tax incidence?
Does minimum wage create a surplus or a shortage of workers?
What is a surplus?
Does the burden of taxes land on the buyers or the sellers?
What is both?
They share the burden of taxes. In the new equilibrium buyers pay more for the good, and sellers receive less.
Policymakers are motivated to control prices because they view the market's out come as..?
What is unfair?