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micro unit 3
| Term | Definition |
|---|---|
| quantity regulations | when to government sets either a maximum or minimum amount that can be sold in a market |
| binding regulation | when the restriction on quantity/price is either above (minimum or floor) or below (maximum or ceiling) the equilibrium quantity/price |
| price regulation | when the government sets a specific price for a good or service |
| price ceiling | maximum price set by government which can lead to shortages (and lower quality as a result/richer people still getting better quality or opportunities) |
| anti price gouging laws | prevent raising prices in temporary situations but can also lead to shortages still |
| price floor | minimum price set by government (goal is to support income, raises prices and lowers quantity sold leading to surplus) |
| regulation | max or min amount that can be sold |
| quota | max that can be bought/sold |
| mandate | requires a certain amount to be bought/sold |
| tax on sellers | shifts supply curve, decline in quantity sold, increases price buyers pay and decreases price sellers receive, share burden |
| statutory burden | who the tax gets placed on by the government |
| economic burden | describes the burden created by the change in after-taxed faced by both buyers and sellers as a result of the tax |
| tax incidence | describes the division of the economic burden of a tax between buyers and sellers |
| tax on buyers | pay tax during check out, shift demand curve left, decrease in quantity sold, increase price buyers pay and decreases price sellers receive, share burden |
| tax incidence and elasticity | since both suppliers and consumers share the burden, the one who is more elastic will share less of the burden (has more options available and can avoid tax) |
| subsidy | payment made by the gov to those who make a specific choice |
| positive analysis | describing what will happen (factual) |
| normative analysis | describing what should happen (opinionative) |
| economic efficiency | the more economic surplus that's generated, the better the outcome (but is a trade off with equity) |
| economic surplus | the benefits that follow from a decision less the costs you incur (marginal benefit-marginal cost) |
| consumer surplus | when you gain economic surplus from buying something (marginal benefit - price) and is for a single consumer |
| total consumer surplus | the area under the market demand curve and above the price |
| producer surplus | economic surplus from selling something (price-marginal cost) |
| total producer surplus | the area below the price and above the supply curve out to the quantity sold |
| voluntary exchange | where buyers and sellers exchange goods only if they both want to which allows people to not purchase at the extremes that are the curve |
| efficient production | occurs when we produce a given level of output at the lowest possible cost |
| efficient allocation | occurs when goods are allocated to create the largest economic surplus from the allocation |
| efficient quantity | the quantity that produces the largest possible economic surplus |
| rational rule for markets | to increase economic surplus, produce more of an item if the marginal benefit of one more is greater than or equal to its marginal cost |
| market failure | when forces of supply and demand lead to an inefficient outcome |
| examples of market failures | other objectives than maximizing profit/utility (morals), incomplete info, market barriers, externalities, non-priced goods/services (relationships) |
| deadweight loss | the difference between the largest possible economic surplus (which occurs at the inefficient quantity) and the actual level of economic surplus (economic surplus at efficient quantity - actual economic surplus) |
Created by:
allison_07