Price Controls
The two types of price controls are
Price floors and price ceilings
How are public goods paid for?
Tax Dollars
This happens when two individuals make a decision without consulting anyone else and a third party is harmed
(e.g. second hand smoke)
negative externality
A tax that disproportionately hurts the poor is called this
Regressive Tax
One of the benefits of price gouging involving suppliers is that
high prices attract more sellers to the market
This sets a minimum price for which a good or service may be sold
Price Floor
This problem arises when people refuse to pay for goods and services that they can get for free
Free Rider Problem
This happens when two individuals make a decision without consulting anyone else and a third party benefits
(e.g. vaccines)
Positive Externality
This type of tax charges individuals an equal percent of their income
(e.g. everyone pays 10% of their wages in taxes)
One of the benefits of price gouging involving demand is that
high prices cause individuals to only buy what they really need
This sets a maximum price for which a good or service may be sold
Price Ceiling
Public goods are this, which means individuals cannot be prevented from using them if they don't pay their taxes
non-excludable
Who are the three parties involved when there is an externality?
Buyer, seller, third party
This tax charges wealthier individuals a higher percentage of their earnings
(e.g. lower income people pay a 10% tax rate whereas wealthier individuals pay a 30% tax rate)
Progressive Tax
List three examples of repugnant markets
organs, human bodies, corpses, ivory, prostitution, slavery etc.
This arises when quantity demanded exceeds (is greater than) quantity supplied
Shortage
Public goods are this, which means that if one person uses them, another persons' experience will not be diminished
non-rival
What is the "actual cost" of something?
The price tag plus the cost of the externalities
List 5 things we need tax dollars for
schools, infrastructure, national defense, public assistance, government, etc
Define repugnant
morally wrong, uncaring, in conflict with
This price control sits below equilibrium
Price Ceiling
Why do private businesses not provide the public goods that governments provide?
There is no economic incentive to produce them. Companies will not make any money
When externalities are present, we have this, because the costs or benefits of a good or service are not assigned properly
market failure
This is a tax on the sale or consumption of goods or services
excise tax
What is the "market price" of a good?
The market price is the current price at which a good can be bought or sold. It is usually where the forces of supply and demand meet