question
Price ceiling
answer
Government imposed limit on how high a price can be charged
- If it is above the equilibrium price, no effect at all
- If it is above the equilibrium price, no effect at all
question
Rent control
answer
price ceiling on rents, set by government
- Market price isn't allowed to ration apartments, alternative methods of rationing develop (nonprice rationing) --> building deteriorate, number of people looking to rent and unable to find apartments increases
- Market price isn't allowed to ration apartments, alternative methods of rationing develop (nonprice rationing) --> building deteriorate, number of people looking to rent and unable to find apartments increases
question
Price floors
answer
Government imposed limits on how low a price can be charged
- Below equilibrium = no effect
- Below equilibrium = no effect
question
Minimum wage laws
answer
Laws specifying the lowest wage a firm can legally pay an employee
- 1.6% of workers receive the minimum wage (almost all are unskilled or part time)
- Market determined equilibrium wage i generally above the minimum wage
- 1.6% of workers receive the minimum wage (almost all are unskilled or part time)
- Market determined equilibrium wage i generally above the minimum wage
question
Who wins and loses from a minimum wage?
answer
Improves the wages of workers who demand a higher wage than the equilibrium creates and are able to find work
- Hurts the workers who cannot find work at the minimum wage but who are willing to work and would have been hired at the market determined wage
- Hurts the workers who cannot find work at the minimum wage but who are willing to work and would have been hired at the market determined wage
question
Why do economists disagree about whether governments should have minimum wage laws?
answer
1) Empirical effects of minimum wage laws are relatively small or even negligible
2) Some real world labor markets are not sufficiently competitive to fit the supply/demand model
3) minimum wages affect the economy in some ways that some see as desirable and others see undesirable
2) Some real world labor markets are not sufficiently competitive to fit the supply/demand model
3) minimum wages affect the economy in some ways that some see as desirable and others see undesirable
question
Excise tax
answer
Tax levied on a specific good
- Luxury tax on expensive cars
- Luxury tax on expensive cars
question
Tariff
answer
An excise tax on an imported good
question
Tax on suppliers
answer
Shifts the supply curve up by the amount of tax
question
Tax on demanders
answer
Shifts the demand curve down by the amount of the tax
question
Licenses
answer
Regulate markets by limiting entry into a market
- Limited entry = fewer suppliers and higher wages
- Market for licenses are also created
- Limited entry = fewer suppliers and higher wages
- Market for licenses are also created
question
Third party payer markets
answer
The person who recieves the good differs from the person paying for the good
- Health care market and insurance --> medicare and medicaid
- Parents or government paying for education
- Third party payers respond by trying to limit the quantity consumed and the amount they'll pay for it
- Health care market and insurance --> medicare and medicaid
- Parents or government paying for education
- Third party payers respond by trying to limit the quantity consumed and the amount they'll pay for it
question
Supply/demand model when there is a third party payer market and a small co payment
answer
- The person who chooses how to purchase doesn't pay the entire cost
- Because the co payment faced by the consumer is much lower, quantity demanded is much greater
- Total spending is much higher than if the consumer paid
- Because the co payment faced by the consumer is much lower, quantity demanded is much greater
- Total spending is much higher than if the consumer paid
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