Price Floors/Ceilings
Type of price control setting a minimum.
What is a price floor?
This term describes the division of the burden of a tax between buyers and sellers.
What is tax incidence?
This term refers to the difference between what consumers are willing to pay for a good and what they actually pay.
What is consumer surplus?
This type of externality occurs when a third party benefits from a transaction without paying for it.
What is a positive externality?
This term describes goods that are non-excludable and non-rivalrous, meaning they can be consumed by many without diminishing availability.
What are public goods?
Type of price control where, on a graph, the line lays ABOVE the equilibrium.
What is a price floor?
If the demand for a good is elastic, this group is likely to bear a smaller share of the tax burden.
What are consumers?
This represents the difference between the price producers receive for a good and the minimum price they are willing to accept.
What is producer surplus?
When the production or consumption of a good imposes costs on third parties, it is referred to as this type of externality.
What is a negative externality?
This phenomenon occurs when individuals benefit from a public good without contributing to its cost.
What is free-rider problem?
Type of price control where the government determines the maximum.
What is a price ceiling?
When supply is perfectly inelastic, the incidence of tax falls entirely on this party.
What are suppliers/producers?
The sum of consumer surplus and producer surplus in a market is referred to as this.
What is total surplus?
This economic condition is achieved when the marginal social cost equals the marginal social benefit.
What is social optimum?
This is the primary reason public goods often require government provision or funding.
What is a market failure?
This is the primary reason governments implement price ceilings, especially in essential goods like housing.
What is to make goods affordable for consumers?
The tax incidence on consumers increases when this occurs in the market, leading to a larger price increase for them.
What is a decrease in supply?
A decrease in price, while holding quantity constant, will cause this effect on consumer surplus.
What is an increase?
This is the term for the loss of economic efficiency that occurs when the equilibrium outcome is not socially optimal due to externalities.
What is deadweight loss?
This term refers to goods that are both excludable and rivalrous, such as food and clothing, in contrast to public goods.
What is a private good?
Price floors can lead to this economic problem when set above the equilibrium price, resulting in excess supply.
What is a surplus?
This term refers to the side of the market (supply or demand) that is less responsive to price changes, thereby bearing a greater tax burden.
What is the inelastic side?
This condition indicates that total surplus is maximized, where marginal benefit equals marginal cost.
What is economic efficiency?
This approach to addressing externalities involves providing financial incentives to encourage behaviors that generate positive externalities.
What is a subsidy?
This type of good is characterized by being excludable but non-rivalrous, such as cable television.
What is a club good?