Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Microeconomics Exam2
| Question | Answer |
|---|---|
| Consumer surplus | Buyers’ willingness to pay for a good minus the amount they actually pay |
| Consumer surplus measures | The benefit buyers get from participating in a market |
| Consumer surplus can be computed by | Finding the area below the demand curve and above the price. |
| Producer surplus | The amount sellers receive for their goods minus their costs of production |
| Producer surplus measures | The benefit sellers get from participating in a market |
| Producer surplus can be computed by | the area below the price and above the supply curve |
| Total surplus | The sum of consumer and producer surplus |
| What maximizes total surplus? | The equilibrium of supply and demand |
| Willingness to pay | the maximum amount that a buyer will pay for a good |
| Cost | the value of everything a seller must give up to produce a good |
| A price ceiling is | A legal maximum on the price of a good or service. |
| If the price ceiling is below the equilibrium price, then the price is | binding |
| When the price ceiling is binding | the quantity demanded exceeds the quantity supplied |
| A price floor is a | legal minimum on the price of a good or service. |
| If the price floor is above the equilibrium price, then the price is | binding |
| When the price floor is binding | the quantity supplied exceeds the quantity demanded |
| When the government levies a tax on a good, the equilibrium quantity of the good | Falls |
| A tax on a good places a wedge between | the price paid by buyers and the price received by sellers |
| When the market moves to the new equilibrium | buyers pay more for the good and sellers receive less for it. |
| The incidence of a tax depends on | the price elasticities of supply and demand |
| tax incidence | the manner in which the burden of a tax is shared among participants in a market |
| How Taxes on Sellers Affect Market Outcomes | -The supply curve will shift left by the exact amount of the tax -The quantity of the good sold will decline. |
| Lessons on taxes | 1. Taxes discourage market activity. 2. Buyers and sellers share the burden of a tax |
| How Taxes on Buyers Affect Market Outcomes | -The demand curve will shift left by the exact amount of the tax -Decrease in demand |
| When supply is elastic and demand is inelastic | the largest share of the tax burden falls on consumers |
| When supply is inelastic and demand is elastic | the largest share of the tax burden falls on producers |
| In general, a tax burden falls more heavily on the side of the market that is | less elastic |
| A small elasticity of demand means | buyers do not have good alternatives to consuming this product |
| small elasticity of supply means | sellers do not have good alternatives to producing this particular good |
Created by:
KenzieMWallace105
Popular Economics sets