2nd econ exam

ceiling

A legal maximum on the price at which a good can be sold is called a price

above the equilibrium price, causing a surplus

A price floor is binding when it is set

demand for the product is more elastic than the supply of the product

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

deadweight loss.

The decrease in total surplus that results from a market distortion, such as a tax, is called a

total surplus is maximized

We can say that the allocation of resources is efficient if

regardless of how the tax is levied

When a tax is levied on a good, the buyers and sellers of the good share the burden,

the tax wedge between producers & consumers prevents beneficial transactions from occurring

Why do taxes cause dead weight loss?

total surplus

can be used to measure a market's efficiency

total surplus

is the sum of consumer and producer surplus.

total surplus

is the to value to buyers minus the cost to sellers.

willingness to pay

measures the value that a buyer places on a good.

tax incidence

the distribution of the tax burden between buyers and sellers