econ exam 3

what do domestic supplies do when the world price falls?

. But when the price falls, American suppliers minimize their losses by supplying fewer cheap shirts, while American buyers amplify their gains by buying more cheap shirts, often from international sellers. (Imports fill the gap between the decreased production by American sellers and the increased purchases by American consumers.) The net effect is that the amplified gains to buyers outweigh the minimized losses to sellers, and so imports lead Americans—taken as a whole—to enjoy more economic surplus.

wha tis the first most favored nation status

. The first, called most-favored-nation status, means that all member nations must treat all others equally—at least as well as the most favored nation.(There is an exception for free-trade agreements.)

marginal utility

. To be precise, marginal utility is the boost to utility you get from an extra dollar.

Social insurance—like private insurance—pays you when you...

... experience a bad outcome

labor supply depends on two factors: th

: the wage, and the marginal benefit of leisure. his means that there are two forces in play here. In fact, when the wage rises, there are two different effects, which work in opposite directions.

what is a binding mandate? what happens when it is placed on sellesr? on buyers?

A binding mandate—meaning that without the mandate the equilibrium quantity would be lower—on buyers increases the quantity buyers demand. A binding mandate on sellers increases the quantity sellers supply. In both cases, the amount of the good or service sold increases to the mandated amount.

what does a high price to sellers mean?

A high price is an incentive for buyers to consume less. For potential buyers, a high price raises the opportunity cost of consuming quinoa, creating an incentive to consume less.

what is a high price mean to sellers?

A high price is an incentive for suppliers to produce more. For suppliers, a high price is an incentive to increase production, because it creates new profit opportunities

another way of seeing the income effect

A higher wage means that you have more income. What should you buy with your extra income? When your hourly wage rate rises, you don't need to work as many hours to buy the things you were purchasing before. Rather than spending your pay increase buying more stuff, you might spend it buying more leisure time. The somewhat counterintuitive result is that the income effect provides a reason for workers to cut their hours in response to a wage rise. The income effect leads to a downward-sloping labor supply curve, as shown i

what is a mandate

A mandate requires you to buy or sell a minimum amount of a good

what does price provide incentives for?

A price provides an incentive for strangers to cooperate.

what is a progressive tax system

A progressive tax system is one in which those with more income tend to pay a higher share of their income in taxes.

what are a quota on buyers deternind by

A quota on buyers, however, will lead to the price at which suppliers are willing to supply the restricted quantity that buyers demand.

A regressive tax

A regressive tax is a tax where those with lower incomes pay a higher share of their income on the tax compared to people with higher incomes. Taxes based on the things you buy, rather than the money you earn, tend to be regressive. The reason is that the rich tend to spend a smaller share of their income. Because state and local governments tax more of what people buy, these taxes are, on average, regressive

what is a price?

A signal An incentive A bundle of information First, a price is a rapid-fire signal, sending messages that are heard around the globe. Second, a price is an incentive, inducing people to make better choices. And third, prices aggregate information, incorporating the judgments that motivate the thousands of buying and selling decisions that push the price up or down. Prices guide nearly every decision we make, helping to organize and coordinate economic activity.

what is a subsidy

A subsidy is a payment made by the government to those who make a specific choice. One way to think about a subsidy is as a negative tax since it operates just like a tax, but with the opposite sign

what does a tax on buyers do

A tax on buyers shifts the demand curve.

what does a tax on sellers do

A tax on sellers shifts the supply curve. The tax represents a marginal cost to sellers because it's an additional cost they must pay for each unit they sell.

what does absolute advantage tell you? what is the definition?

Absolute advantage tells you who's best at a task, but not who should do the task? absolute advantage, which is the ability of one person to do a task using fewer inputs than someone else?

what is absolute poverty

Absolute poverty judges the adequacy of resources relative to an absolute or unchanging standard. By this view, the poverty line measures whether your basic needs are met, assuming a universal, time-invariant standard for basic needs. By this view, the poverty line should be the same in the United States as in Zambia, and the same today as in prehistoric times.

what are the sources of comparative advantage

Abundant inputs Specialized skills Mass production

what do administrive costs do?

Administrative costs subtract from what you can redistribute.

What are exports? why would you choose to do that?

American businesses choose to export—that is, sell their goods or services to foreign buyers—when they can get a better price than if they just sold them in America

Is fairness about equality of opportunity?

An alternative view of fairness emphasizes equality of opportunity, rather than equality of outcomes. The basic idea is that fairness requires a level playing field that ensures that people with the same native talents and ambition can compete on equal terms for higher incomes. lents and ambition can compete on equal terms for higher incomes. Consequently, fairness requires eliminating discrimination on the basis of race, gender, or ethnicity. It also requires ensuring that children from low-income families and disadvantaged communities can compete on equal terms with children whose families provide them with private schools, tutors, and family connections. Typically, this requires redistributing resources—such as through support of public schools—to ensure that all kids get a fair shot.

what are import quotas? what are they?

An import quota limits the quantity of a good that can be imported. they raise the price of foreign goods, reducing the quantity of international trade An import quota limits the quantity of a good that can be imported.

diminishing marginal utility.

And because each additional dollar yields a smaller boost to your well-being, you have diminishing marginal utility.

what is the second most favored nation status

And second, the national treatment principle means that imported goods and locally produced goods must be treated equally once they've entered a country. If your business is hurt by trade barriers that violate these principles, there may be a useful remedy.

what is the hours of work

And the quantities a salon buys are their hours of work

explain rebuttal to the argument that international trade needs limited becasuse it prevents unfair

Anti-dumping laws prevent unfair competition. Another argument suggests that trade policy should be used to shield domestic businesses from unfair competition. For instance, sometimes a foreign company will temporarily charge extremely low prices—effectively "dumping" their goods on the U.S. market—so that they can drive their U.S. competitors out of business. If successful, this would lead to less competition and higher prices in the long run, which would be bad for American consumers.Whatever the reality, local businesses will try to convince the government that cheap imports represent unfair competition. Sometimes those local businesses are right, and anti-dumping laws serve their purpose. But frequently, these foreign businesses simply hold a comparative advantage that allows them to produce at a lower cost.

example of changing benefits of not working effecting labor supply

Anything that lowers the cost of child care will increase the labor supply of parents, by reducing their benefit of staying home and providing the care themselves. And if Congress were to reduce Social Security retirement payments to older Americans, then the labor supply of people over age 60 would likely increase.

how do you figure out the right occupation

Apply the cost-benefit principle to figure out the right occupation for you.

t/f There are unintended consequences of price controls. give an example

As a result, landlords are often less responsive to requests for repairs Rent control may also change how landlords select their tenants Rent control may also change how potential renters behave

who has supply and demand in the labor market

As a worker, you're on the supply side, looking to sell your labor for the highest wage you can get. And businesses are on the demand side, looking to hire the best workers they can find at the lowest price possible.

what happens as trade costs fall

As trade costs fall, companies trade more intermediate inputs, creating global supply chains

what are your benfits based on

Benefits are based on your past earnings. Those who have earned more have paid more in, and are eligible to receive more benefits. Social insurance programs are explicitly not means-tested. That means that you don't need to have a financial need to get access to these benefit

who bears the economic burden of a tax on sellers?

Both buyers and sellers bear the economic burden of the tax on sellers.

why is annual income not a good measure of income inequality?

But annual income is by no means the single best indicator of your living standards, your purchasing power, or your opportunities. Income varies from year to year for many people, and people differ in both the amount of their savings and their ability to earn more in the future. temporary ups and downs

what is the economic burden

But if you want to know who experiences a greater loss as a result of the tax, you should focus instead on the economic burden , which describes the burden created by the change in after-tax prices faced by buyers and sellers as a result of the tax.

who bears the economic burden of the tax on buyers

Buyers and sellers bear the economic burden of a tax on buyers.

when do buyers have a smaller share of the economic burden

Buyers bear a smaller share of the economic burden when demand is relatively elastic. The more you reduce the quantity you demand in response to a tax-induced price hike, the more you are effectively avoiding the tax, leaving sellers to pay more. Your price elasticity of demand—that is, your responsiveness to an increase in price—is determined by the substitutes available to you.

what is the rate of child poverty? is it common?

By contrast, child poverty is quite common, and one in six kids are in poor families. That means that you or some of your childhood friends likely grew up in poverty. Even though many people keep it hidden, the fact that a large number of children are in poverty is a reality in most communities.

What's the power of comparative advantage:

By ensuring each task is done at the lowest opportunity cost you produce more in the same amount of time.

how do you find the comparative advantage?

Calculate the opportunity cost of each task. opportunity cost= hours this class takes/hours required to produce alternative outputs

labor supply shifters

Changing wages in other occupations. Changing number of potential workers. Changing benefits of not working. Nonwage benefits, employment subsidies, and income taxes

summary of the effects of allowing imports to fall

Cheap foreign competitors cause the price of goods we import to fall. Buyers respond by raising the quantity they demand, while sellers respond by reducing the quantity they supply, with imports filling the difference. The lower price increases the consumer surplus of buyers, and decreases the producer surplus of sellers. And because buyers amplify their gains and sellers minimize their losses, the net effect is for total economic surplus to increase.

what raises consumer surplus? why?

Cheap imports raise consumer surplus. Allowing imports leads domestic buyers to pay a lower price, and at this lower price they buy a larger quantity of these cheap shirts. As a result, the consumer surplus of domestic consumers rises

what drives international trade?

Comparative advantage drives international trade. Specializing according to comparative advantage can give us both more stuff. The only thing that's different about international trade is the scope and scale of specialization that's possible when there are 8 billion people scattered around the world to trade with. It leads Americans to export those goods where their opportunity costs are low and to import goods for which their opportunity costs are high. This is why American computer scientists and engineers design the iPhone, while Chinese factory workers manufacture them.

how does comparative advantage explain international trade

Comparative advantage explains how you benefit from specializing in some tasks and trading with others. This also means that comparative advantage explains why we trade with people who live in other countries, and hence it explains international trade.

what explains why people specialize

Comparative advantage explains why people specialize. Do more of what you're relatively good at, and less of the other stuff.

what explains why there are gains from trade in markets?

Comparative advantage explains why there are gains from trade in markets. The big idea here is that people following their comparative advantage creates gains from trade.

what is comparative advantage all about?

Comparative advantage is about reallocating resources to their better uses.

what is comparative advantage all about

Comparative advantage is all about opportunity cost.

why are domestic buyers unhappy with tariffs

Domestic buyers are unhappy because the higher price means they either pay an extra $4 per shirt or buy fewer shirts.

why do domestic consumers lose consumer surplus?

Domestic consumers lose consumer surplus due to foreign competition. Domestic buyers are worse off because they now have to compete with buyers in other countries, and so the price they pay rises to the higher world price, which also causes them to reduce the quantity they demand.

why do domestic producres lose surplus?

Domestic producers lose producer surplus due to foreign competition. Domestic producers are worse off because a lower world price means that they have to sell their shirts at lower prices, and as a result, they no longer find it profitable to sell as many shirts. Graphically, producer surplus is the area above their domestic supply curve but below the price they now charge, which is now the lower world price.

why are domestic buyers happy with the imposed tariff

Domestic suppliers are happy because the higher price means higher profit margins on each shirt sold and they also sell an increased quantity.

what is permanent income

Economists believe that your living standards largely reflect your permanent income—which is your average lifetime income—rather than your income in a given year.

what is derived demand

Economists call this a derived demand, because the demand for labor is derived from the demand for the stuff they make for you to sell.

utillity

Economists refer to your level of well-being as your utility

what is exchange rate manipulation and what does it do?

Exchange rate manipulation changes the price of your goods in foreign markets. Foreign governments also can give their companies a leg up by manipulating their exchange rate

who supports international trade

Exporters and import-dependent businesses support international trade. Similar logic says that the groups most likely to lobby most strongly in favor of free trade are those who gain from the ability to compete in foreign markets.

what do exports lead to?

Exports lead to higher prices, more domestic production, and less domestic consumption.

are federal income taxes progressive or regressive?

Federal income taxes are progressive

why do governments provide in kind benefits

First, giving goods rather than cash prevents recipients from making bad choices, such as gambling the money away. Second, taxpayers may care more about reducing homelessness or hunger, rather than about what will make the recipient happiest. Third, providing an in-kind benefit that only the poor will value—such as public housing—makes it more likely that only those who truly need the assistance will get it. And fourth, some in-kind benefits—such as child care—are a complement to work, which helps offset the incentive for recipients to rely on the safety net rather than work.

what happens to people who are in poverty? what about most people?

First, most people who are in poverty will spend much of their lives in poverty—but most people will spend some time in poverty in their lifetime

3 labor supply decisions in life

First, you have to decide whether to work. Second, you have to decide how many hours to work. And third, you have to decide what kind of work you should do.

is geography relevant when it comes to trade?

Geography is irrelevant. This idea of assigning tasks to those with the lowest opportunity cost is no less persuasive if the folks with the lowest opportunity cost happen to live in another country

why is global trade rising

Global trade is rising because of declining trade costs. International trade—both exports and imports—has been a growing share of the U.S. economy throughout the entire postwar period (Figure 1). This trend—sometimes called "globalization"—has transformed the economy. And it's largely due to declining trade costs.

what is the social safety net

Government funds the social safety net, which is the cash assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution.

how does government raise money for the safety net?

Government raises the money for the safety net (and everything else it does!) through taxes—which themselves are an equalizing force, since our overall system of taxation is progressive

who gets bigger tax breaks

Higher income people get bigger tax breaks.

what do higher taxes mean

Higher taxes mean more tax avoidance, tax evasion, and fraud.

explain how new people may be induced to enter the workforce make the market labor supply curve upward-sloping

Higher wages convince more people to work, rather than pursue alternatives, such as studying, retiring, or working as a homemaker. A higher wage for hair stylists may induce some people who weren't working to decide to look for a job as a stylist. For example, a parent who stopped working as a stylist to stay home with their kids might be induced to go back into the labor market if the wage for stylists is high.

The Rational Rule for Employers: why do we use this?

Hire additional workers as long as their marginal revenue product is greater than (or equal to) the wage. follow this because ti maximizes your profits

How do you know whether the scale effect or the subtition effect will dominate?

How do you know which effect will dominate? It tends to differ by occupation. Thus in occupations with many routine tasks—like many fast-food jobs—a decline in the price of capital tends to lead to a decrease in the demand for labor. High-skilled workers often do fewer routine tasks and so are more likely to be complements to capital equipment. Thus in labor markets for high-skilled workers—like computer scientists—a decline in the price of capital (like computers) tends to lead to an increase in the demand for their labor.

Market labor supply depends on:

How many people decide to work How many hours existing workers put in Which occupations people choose

how to knwo if the income effect is dominnant

If the income effect is dominant, then your individual labor supply curve may be downward-sloping

what determines whether labor and capitol are complements or substitutes

If the scale effect dominates then labor and capital are complements, so a decrease in the price of capital will lead to a rightward shift of the labor demand curve. If the substitution effect dominates then labor and capital are substitutes, so a decrease in the price of capital will lead to a leftward shift of the labor demand curve.

how do you know if the substituion effect is dominant

If the substitution effect is dominant, then your individual labor supply curve is upward-sloping

what is the only way to avoid a tax hike as a seller?

If you're a seller, the only way to avoid a tax hike is to supply a smaller quantity. . Sellers avoid a tax by decreasing the quantity they supply as the after-tax price they receive falls

what does it mean to Develop a specialized skill and its relation to comparative advantage

If you—or a country or a business—focus on a particular product for a long time, you'll likely discover new production techniques that lower your costs. This comparative advantage gets stronger over time, as you produce more and learn more. Economists refer to this as "learning by doing," and it explains how a long-term investment in a specific industry can pay off

who opposes international trade?

Import-competing businesses oppose international trade. The folks arguing most vehemently against international trade are typically those who stand to lose from it.

what do imports lead to?

Imports lead to lower prices, less domestic production, and more domestic consumption.

what wage is paid by employers in a competitive labor market

In a competitive labor market, employers pay the market wage.

what is the most reasonable way to measure poverty?

In reality, most people consider something between absolute and relative as a reasonable way to measure poverty,

which factor gets more of the benefits of the subsides

In short, just like the elastic factor gets out of the way of taxes, the elastic factor gets out of the way of subsidies

is income inequality rising? why?

Income inequality is rising. The highest-income quintile has increased their share of income from 40.9% in 1970, to 48.8% in 2017. The share of income accruing to each of the other quintiles has declined.

Income taxes

Income taxes are taxes collected on all income, regardless of its source. Income includes earned income from wages and unearned income—such as investment income, pensions, and gifts.

what is an inequality of outcomes

Inequality in current and permanent income, consumption, and wealth are all examples of inequality in outcome

what is an internal prediction market? what does it do?

Internal prediction markets can improve your forecasts. Another type of internal market—an internal prediction market—can be helpful whenever you need an accurate forecast

deos everyone win in international trade?

International trade increases economic surplus, but not everyone wins. But trade doesn't just expand the pie; it also redistributes it. And that means that not everyone gains.

what is raising income inequality within the United States.

International trade is raising income inequality within the United States.

what resphapes forces of supply and demand in the united states

International trade reshapes the forces of supply and demand in the United States,

why is it known as social insurance

It is known as "social" insurance because it is provided "socially"—by your fellow taxpayers—rather than by private insurance firms. But the point of social insurance is that everyone is covered, regardless of how much money they have.

why is labor demand curve downward sloping

Labor demand is downward-sloping because of diminishing marginal product.

what is labor demand equal to

Labor demand is equal to the marginal revenue product of labor.

what do labor supply decisions involve

Labor supply decisions involve whether you should work, how much you should work, and what you should do.

what type is sloping is the market labor supply curve

Market labor supply curves are upward-sloping—meaning that the higher the wage in a particular occupation, the more people there are willing to work in that occupation.

what do market prices broadcast

Market prices broadcast useful information. Tracking the price of these contracts can provide useful intel about future disruptions to your input costs.

how do markets help strangers?

Markets help strangers exploit the gains from trade that come from specializing according to comparative advantage.

how to markets offer the opportunity to specialize

Markets offer the opportunity to specialize according to comparative advantage.

what solves the market problem? why?

Markets solve the knowledge problem. This internal market avoids the knowledge problem, because it doesn't rely on a centralized decision maker knowing what's best or rely on personal relationships that may lead some regional food banks to do better than others. Instead, it relies on each regional food bank knowing its own marginal benefit and bidding accordingly

what raises producer surplus in terms of exports?

More expensive exports raise producer surplus. Allowing exports raises the price that domestic sellers get for their snowmobiles, which leads them to sell a larger quantity. As a result, producer surplus rises.

can you have multiple poverty susceptibilities against you?

Moreover, these disadvantages cumulate, so that nearly half of the children of black or Hispanic single parents live in poverty.

what is the difference between poverty spells and long term poverty?

Most poverty spells are short, but most poor people are in long-term poverty

t/f The United States has signed many free-trade agreements. if true, list them

NAFTA, CAFTR-DA, he United States has also negotiated bilateral (that is, two-way) trade deals with Israel, Jordan, Singapore, Chile, Australia, Morocco, Bahrain, Colombia, Panama, and South Korea. While these are often called "free-trade agreements," it is more accurate to call them free-er trade agreements, since they typically reduce rather than eliminate trade barriers.

explain rebuttal to the argument that international trade needs limited becasuse national security

National security requires that we produce strategically important goods ourselves.

does it matter who has the statutory burden matter

Neither buyers nor sellers should care about who has the statutory burden, because a change in the statutory burden doesn't affect the economic burden they each face.

what are the three reasons that the market labor supply curve is upward-sloping:

New people may be induced to enter the workforce. Existing workers may put in more hours. Some people may switch occupations. How many people decide to work, How many hours existing workers will put in, and Which occupations people choose.

what does new technology do for owners? what does it lead to?

New technology helps the owners of the robots at the expense of workers. Technology leads to the end of some jobs and the birth of others, but other jobs will emerge in other sectors.

what is the official united states declaration of poverty

Officially, in the United States you are in poverty if your family income is below the poverty line.The poverty line is a somewhat arbitrary threshold. It was originally set in 1963, using data on food purchases in 1955. Back then families spent about a third of their incomes on food, so the poverty line was set at three times the cost of a low-cost food plan. The poverty line has been updated for inflation ever since. In 2018, the federal poverty line for a family of four was a family income of $25,700, and it was $16,300 for a family of two. The line varies to reflect the costs of supporting different sized families.

why do governments take actions?

Once we take taxes and transfers—meaning the cash, goods, and services the government provides some people—into account, there is less inequality and less poverty. That's because most governments take actions that help reduce the inequality and poverty that would occur without government.

are more equal outcomes fair or not?

One common belief is that more equal outcomes are fairer.

what is one approach of measuring relative poverty

One common measure of relative poverty says that you are poor if your family income is below half the median family income. Another approach to measuring relative poverty involves surveying the public about what they think is an adequate income to "get by." Figure 9 shows that the average responses have risen as our society has gotten richer. This suggests that most people think about minimal income needs as being relative to the contemporary standards of their society.

Is fairness best judged behind the veil of ignorance?

One way to think about whether society should be more or less equal is to ignore the circumstances you happen to have been born into. Instead, ask yourself what you would want if you didn't know what circumstances you would be born into, what philosophers call behind the "veil of ignorance." It's a powerful way of thinking clearly about what makes for a just society.

is our current tax system progressive or regressive

Overall, the tax system is progressive. taxing the rich at a higher rate than the poor

who pays into social insurance programs

People pay into social insurance programs.

what is the best measure of your living standards?

Permanent income may be a better measure of living standards. There is less inequality in permanent income than in measured annual income because some of income inequality reflects temporary ups and downs that don't reflect your long-run economic situation. There are also clear patterns as you age—people earn less when they are young and tend to earn more as they get older and more experienced. So some inequality reflects differences between younger and older people. Because people can borrow and save, annual income is not as good a predictor of what you can afford to consume compared to your permanent income.

explain rebuttal to the argument that international trade needs limited becasuse foreign competition may lead to job losses.

Possibly the most common argument against free trade comes from workers who are concerned that foreign competition will cost them their jobs.While reducing foreign trade can preserve some jobs in import-competing sectors, it will destroy jobs in businesses that rely on imported inputs. Indeed, Figure 8 shows that there is no relationship between how much a country imports and its unemployment rate.So while trade might only have a temporary effect on unemployment, this "temporary" effect may last long enough to be virtually permanent for some people.

why do prediction markets yield useful forecasts

Prediction markets yield useful forecasts because prices aggregate information. For instance, someone in Wisconsin who sees a lot of yard signs and bumper stickers supporting the Democrat might buy stock, while someone in New Mexico who saw the candidate give a bad speech might sell it

what do price ceilings cause

Price ceilings lower prices, but cause shortages.

what does comparative advantage say in terms of importing and exporting?

Produce what you're good at and buy what you aren't. Applied to international trade, this says to export the stuff you can produce at the lowest opportunity cost, and import the other stuff.

what determines average wages

Productivity determines average wages. This leads some to worry that globalization may force U.S. wages down to the low levels seen in countries like China, India, or Mexico. If all workers were similar, this might be a long-run consequence of international trade Fortunately, wages aren't going to be equalized anytime soon, because workers are not all the same. The productivity of an average American manufacturing worker is 12 times higher than that of their Chinese counterpart.

Arguments for limiting international trade:

Protecting national security Helping infant industries Preventing unfair competition Enforcing minimum standards Saving jobs

explain rebuttal to the argument that international trade needs limited becasuse helping infant industries grow

Protection can help infant industries develop. The infant industry argument suggests that governments can help create new industries by shielding fledgling businesses from international competition. But the infant industry often fails to grow up.

what happens when buyers import goods

Putting the pieces together, we've found that when buyers import goods: The price declines to the world price. This lower price leads to a lower quantity supplied by domestic sellers, but a higher quantity demanded by domestic buyers. Imports fill the gap between the quantity demanded and the quantity supplied.

can quoatas be placed on buyers? are they normally?

Quotas can be on buyers—for instance, many states that have legalized marijuana limit the amount that people can buy per day. These limits are designed to reduce the quantity sold by reducing demand. Quotas, however, are more frequently placed on suppliers.

what do quotas do? are they common?

Quotas raise prices. Quotas are quite common.

what is a quota

Quotas set a limit on the maximum quantity of a good that can be sold.

what is the big pay off of comparative advantage? why?

Rearranging who does what creates more stuff. Simply by rearranging who does what, you can produce more stuff with the same inputs. All you need to do is reallocate the tasks so that we each do more of those tasks where we each hold a comparative advantage, and less of the other tasks.

what can redistribution increase?

Redistribution can increase total well-being. .

Redistribution is costly, because of:

Redistribution is costly, because of: Administrative costs Higher taxes and benefit reductions, both of which can reduce the incentive to work Tax avoidance, evasion, and fraud

what do relative poverty measures say?

Relative poverty measures say that more people are in poverty.

explain how Some people may switch occupations labor supply curve upward-sloping

Remember that wages help shape which occupations people join. So if the wage of hair stylists increases, more people would apply for jobs as a stylist, rather than for jobs in retail or waiting tables. The ready supply of potential new hair stylists at this higher wage is large.

what type of tax do workers bear the most burden from

Research shows that workers tend to bear most of the economic burden from Social Security taxes, because labor supply is fairly inelastic

what does saving do

Savings help people smooth the income bumps in the road that we all face.

what are 2nd and 3rd factors that influence poverty?

Second, children and single moms are the most likely to be in poverty. Third, people of color are more likely to experience poverty

what is the substitution effect

Second, there's a substitution effect countering this: There are many tasks that can be done by either workers or machines. And so when the price of these machines falls, the demand for workers to do tasks that can be substituted for machines decreases.

who bears the smaller share of the economic burden when supply is relatively elsastic

Sellers bear a smaller share of the economic burden when supply is relatively elastic.

what does poverty look like for single parents?

Single parents—particularly single mothers—experience extremely high poverty rates. It's not just a matter of having only one income; single parents also face logistical difficulties juggling work with their child-care responsibilities, and income-based government assistance for single-parent families isn't generous enough to lift them out of poverty.

extreme efficiency vs perfect equality out comes

So extreme efficiency comes at a cost of terrible inequality, while perfect equality comes at a cost of terrible inefficiency. In reality, no one thinks either extreme makes sense. Instead, our political debates are typically about how much pie to trade off in order to give everyone a fairer share.

marginal revenue product defintion and equations?

So she focuses on the marginal revenue product, which is the marginal product of labor (the extra output due to hiring one more worker), multiplied by the price she can sell that output for. The marginal revenue product is the extra revenue produced by hiring an additional worker. For example, if Gabriela hires one more stylist, she calculates that she can sell 40 more haircuts per week. If each haircut sells for $20, then the marginal revenue product of hiring that additional stylist is 40 extra haircuts times $20 per haircut, or $800 per week.

what happens when the demand for what you sell increases

So what happens when the demand for what you sell increases? If it leads the price of your product to rise, then the marginal revenue product of all of your workers is higher.

what does social security ensure

Social Security insures us against outliving our savings; in that way it also insures us against the possibility of making bad decisions about retirement.

why is social insurance designed

Social insurance is designed to help reduce some of the hardship associated with a spell of very little income

what is excluded from income taxes

Some investment gains are excluded from income taxes. And because capital gains tax rates are lower than income tax rates, people who earn much of their income from investment gains end up paying a lower average tax rate than people who earn most of their income in wages.

Is fairness about what you deserve?

Some people think of fairness in terms of what you deserve, or what you contribute to society.

A three-step recipe identifies who has a comparative advantage in each task.

Step one: Determine how long each task would take each person (as in the top panel of Figure 1). This measures the cost of producing each good, in hours. Step two: Convert this into a measure of opportunity cost, by calculating how much of the alternative good you could have produced in that time. Step three: Evaluate who has a comparative advantage at each task by assessing who can produce each good at the lowest opportunity cost.

steps to evaluating taxes

Step one: Is the supply or demand curve shifting? Step two: Is that shift an increase in taxes, shifting the curve to the left? Or is it a decrease in taxes, shifting the curve to the right?Step three: How will prices and quantities change in the new equilibrium?

three step process to Evaluate how imports shape domestic markets.

Step one: What will be the price of a traded good? Step two: At this new price, what quantities will be demanded and supplied by domestic buyers and sellers? Step three: What quantity will be traded?

three step process to evaluate how exports shape markets?

Step one: What will be the price of a traded good? Step two: At this new price, what quantities will be demanded and supplied by domestic buyers and sellers? Step three: What quantity will be traded?

what is the three step process to adding a tariff?

Step one: What will the new price be? Step two: At this new price, what quantities will be demanded and supplied? Step three: What quantity will be traded?

what do subsidies do for quantity demanded and supplied, prices, and the price that sellers receive?

Subsidies increase the quantities demanded and supplied, and they tend to lower the price buyers pay and increase the price sellers receive. And just like a tax, the outcomes don't depend on the statutory assignment of the subsidy.

what are abundant inputs

Take advantage of what you have, to get what you want. Some of this relative abundance of inputs is simply a matter of climate, geography, and natural resources. But people, businesses, and countries can shape their advantages through strategic investments. This focus on abundant inputs suggests that international trade is all about exporting products made with resources you have a lot of, and importing products made with resources that are scarce

what do exclusions of the taxable income create?

Taken together, these exclusions reduce the taxable income of the highest earners the most because they spend more of their money on the types of things for which there are special exemptions. That means that exclusions reduce the progressivity in the tax system.

what is another debate about inequality driven by

Taken together, we see that while some of the debate about inequality is driven by differences about what people want, some of it is driven by a lack of knowledge of the facts

what is a tariff

Tariffs are a tax on imported goods. As tariffs are taxes on imported goods, they increase their trade costs. We can use our domestic demand and supply curves to figure out the consequences of this higher trade cost.

what does the tax incidence depend on

Tax incidence depends on the price elasticity of demand and supply.

what is a tax incidence

Tax incidence describes the division of the economic burden of a tax between buyers and sellers.

what reduces the incentive to work?

Taxes and means-tested programs reduce the incentive to work. When you get a smaller reward for working, you might choose to work less. That's why when the government tries to redistribute money by taxing high earners, those high earners might respond by working less, leaving less money available to be redistributed

why are taxes that fund most social insurance programs not porgressive

Taxes that fund most social insurance programs are not progressive. For example, Social Security taxes are only applied to roughly the first $130,000 of wages.

what is the idea behind internal markets? what are internal markets?

That's the idea behind internal markets, which are markets that managers set up within their organization so that different divisions can buy and sell scarce resources. Just as regular markets efficiently allocate scarce resources to better uses, internal markets can help your company, nonprofit, or government agency allocate scarce resources to better uses.

rational rule for sellers

The Rational Rule for Workers: Work one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure.

what is the difference between global poor and U.S. poor

The U.S. poor are not members of the global poor. For the most part, people struggling with poverty in the United States and other developed countries are better off than those struggling in the developing world

what is the united states more unequal than? why?

The United States is more unequal than most developed countries. . The United States stands out because its rich are richer than those in other countries.

what is the world trade organization

The World Trade Organization is a forum for global agreements to reduce trade barriers.

what is relative poverty

The alternative view is relative poverty, which judges poverty relative to the material living standards of your contemporary society. By this view, poverty is not just about physical measures of need, but whether you have the resources necessary to participate in your society. What's considered essential depends on what everyone else in the community has.

what inputs are abundant in the United States?

The answer is a specific category of labor: highly educated workers.

if consumers lose surplus do to exporting goods, why do we do it?

The benefits exceed the costs, and exports raise total economic surplus.

if producer surplus is minimized, why do we import?

The benefits exceed the costs, and imports raise total economic surplus.

what all do you gain from working

The benefits of working include not only the wage that you'll earn, but also the nonwage benefits like health insurance that come with the job, along with the fact that today's work experience might help boost your future earnings.

what is the biggest risk of getting into poverty

The biggest risk is losing a job. Another significant trigger is divorce or separation, which leads family income to be spread across two households. Other changes in the household can also be trigger points for poverty, such as the birth of a child, the death of a breadwinner, or a young adult trying to set up on their own.

where is the distribution of income most unequal?

The distribution of income around the world is even more unequal. This global context suggests that even the very poor in the United States are well off compared to the billions of people scraping to get by in India, China, and all the other countries in the developing world.

what is the domenstic demand curve

The domestic demand curve illustrates the quantity of goods that domestic buyers—that is, all Americans taken together—plan to buy at each price.

what does the demand curve look like for the law of demand?

The downward-sloping labor demand curve is just the law of demand, applied to the labor market. A

marginal product of labor

The extra output you produce from hiring an extra worker is called the marginal product of labor.Recall from Chapter 3 on supply that most businesses experience diminishing marginal product—meaning that at some point, hiring additional workers yields smaller and smaller increases in output.

which factor will have a smaller share of the economic burden?

The factor that is more elastic will have a smaller share of the economic burden.

when do price ceilings have no effect

The first thing to note is that when price ceilings are above the equilibrium price, they don't have any effect.

what is the gain government gets from a tariff

The government also gains because it collects $4 of revenue for each shirt imported.

what doe it mean to say the rich are getting richer?

The highest-income quintile has increased their share of income from 40.9% in 1970, to 48.8% in 2017. The share of income accruing to each of the other quintiles has declined.

where does the idea of maximizing total well being come from

The idea of maximizing total well-being comes from utilitarianism.

income effect

The income effect says higher income makes leisure more attractive. The income effect measures how people's choices change when they have more income. Because your demand curve is also your marginal benefit curve, this also means that your marginal benefit of normal goods goes up when your income increases. So what does this mean for leisure? For most people, leisure is a normal good, so a rise in income means an increase in the marginal benefit of leisure. Thus a higher wage—which boosts workers' incomes—will lead them to choose more leisure, which means working fewer hours.

globalization

The increasing global integration of economies, cultures, political institutions, and ideas is called globalization

what are the main effects of imports?

The main effect of imports is to lower the price of shirts, and if American producers wanted to, they could sell just as many shirts as before, just as American consumers could buy just as many as before.

what is the marginal cost of another worker? marginal benefit?

The marginal cost of another worker is the increase in your business's costs due to hiring one more worker—which is simply the weekly wage you pay that worker.The marginal benefit is the extra revenue you'll earn

what leads to larger gains in trade?

The more your trading partner differs from you, the larger the gains from trade will be. If your trading partner has very different resources—whether they're worker skills, machinery, natural resources, or climate—it's likely they'll also have very different opportunity costs, leading to gains from trade.

Is the U.S. poverty line an absolute or relative standard? what are the advantages and disadvantages?

The official U.S. poverty line has features of both a relative and an absolute standard. It's relative, in that it is set at a level that reflects the fact that the United States is a rich country. But technically it's an absolute poverty line, because—as Figure 9 shows—it was set at an absolute level more than fifty years ago. Since it was set in 1963, it has only been adjusted for inflation—which means that it can buy the same bundle of goods it could buy in 1963. The advantage of this approach is that it tracks through time how many people are below an unchanging standard. The disadvantage is that living standards have risen over time, and so it has become decreasingly relevant as our society has become increasingly prosperous

how has the poverty rate changed over time. what does this suggest?

The official poverty rate has not changed much over time.hows that the share of people whose income is less than the official poverty line has been largely stable at around one in seven over the past four decades, even though the average income of the population as a whole has doubled. This suggests that those at the bottom of the income distribution have not shared in the rising prosperity of the past four decades.

how is the official poverty rate calculated? what does this fail to account for? what is the result?

The official poverty rate is calculated using a measure of income that is mainly market earnings. Yhis means that the official poverty rate fails to account for the tax credits and many benefits provided by government programs designed to help the poor. As a result, the official poverty rate doesn't adequately capture the resources available to the poor. However, the official poverty rate provides a useful indication of what might happen without government intervention.

how many people are in poverty? what is the amount of people in poverty called?

The official poverty rate is the share of people whose family income falls below the poverty line. The poverty rate in 2017 was 12.3% of the population, meaning that roughly one-in-eight people were in poverty.

what is the opp cost of working

The opportunity cost of working is everything you do when you're not working. Every hour that you spend working is one less hour you have available for other things besides paid work

what is the main principle behind trade costs?

The opportunity cost principle reminds you to consider the full set of costs—not just the out-of-pocket financial expenses. And so trade costs also include the hassle of working across language barriers, trading across different time zones, dealing with foreign laws, and adapting to different ways of doing business.

what is a price floor

The opposite of a price ceiling is a price floor, which is when the government sets a minimum price.

How do you determine what the comparative advantage is? why?

The person with the lower opportunity cost of completing a particular task has a comparative advantage at that task. It's comparative because opportunity cost compares what you can produce if assigned one task with what you would produce if you spent that time on another task. And it's an advantage, because a lower opportunity cost means that you give up less to get a task done and so it's more efficient for you to do that task.

utilitarianism.

The political philosophy that government should try to maximize total utility in society is known as utilitarianism.As such, government can raise total utility by redistributing resources from the rich to the poor.

what does the price elasticity of labor supply measure

The price elasticity of labor supply measures workers' responsiveness to wages.

why is the price a signal to buyers

The price is a signal to potential buyers. Potential buyers may not otherwise know what is happening on the supply side of the market. More generally, the price tells potential buyers about how expensive it is for sellers to produce more of a product, as it reveals the seller's marginal cost. more expensive, buy less

why is price a signal to potential suppliers?

The price is a signal to potential suppliers. Potential suppliers may not otherwise know much about what's happening on the demand side of the market. More generally, a price tells potential suppliers how much buyers value their products, because it reveals the buyer's marginal benefit, or willingness to pay. increases, sell more

what is the wage

The price of an hour of a hair stylist's time is their hourly wage.

what does the process of buying and selling do?

The process of buying and selling aggregates information.

how prevelant are safety nets?

The safety net helps support a lot of families. Once we account for the overlap across programs, somewhere between one-in-three and one-in-four people live in a household currently receiving some form of assistance.

what do safety nets include

The safety net includes cash assistance, tax breaks, and in-kind transfers.

how is the social safety net tested? what does that mean?

The safety net is means-tested. In order to ensure that benefits only reach the truly needy, social safety net programs are means-tested, which means that your eligibility depends on your income This patchwork of programs means that some people fall through the cracks and don't receive any assistance, while others are eligible for several programs.

how helpful are safety nets

The safety net provides minimal support. But these safety net programs often provide enough to raise low-income families with children above the poverty line. Recall that the poverty rate is calculated excluding most of these benefits—direct cash assistance like welfare and Supplement Security Income is included, but the other benefits are not. Including the value of all benefits helps lift about a third of the people living in poverty above the poverty line.

what is the substition effect

The substitution effect says that higher wages make work relatively more attractive. The substitution effect says that higher wages make work relatively more attractive. because higher wages are an incentive to substitute more work for less leisure. The substitution effect is why people work longer hours when their wages rise, and so it leads to an upward-sloping individual labor supply curve,

effective marginal tax rate.

The sum of higher taxes and reduced benefits accruing from each dollar you earn is called your effective marginal tax rate. those with low incomes can face such high effective marginal tax rates that even though they are earning more through work, their living standards hardly improve at all.

what does a tax on sellers do to buyers and sellers

The tax increases the price buyers pay and decreases the price sellers receive.

what does the tax on buyers do to the buyers and sellers

The tax increases the price buyers pay and decreases the price sellers receive.

what does a tax lead to in terms of quantity sold

The tax leads to a decline in the quantity sold.

what does a tax on sellers lead to

The tax leads to a decline in the quantity sold.

how does the labor supply grow?

The total number of people in the labor market is a subset of the total number of people in a society. That means that when the population grows, so does potential labor supply.

is there less inequality in spending or in income? why?

There is less inequality in spending than in income. An alternative approach suggests that because your living standards are largely determined by the goods and services you actually buy and consume, inequality in living standards may be better measured by focusing on what people spend, rather than what they earn.But people whose incomes are temporarily high or low drive much of the measured inequality in income. Those with temporarily high incomes are saving because they know that their good times won't last. Since these folks maintain more moderate spending habits, there is less consumption inequality.

is there more inequality in wealth inequality than in your income? why?

There is much more inequality of wealth than income. Your total purchasing power and your economic resources may be better represented by your wealth than your income. This inequality partly reflects the fact that wealth accumulates and is passed from generation to generation.

what is the trick when it applies to taxable income

There's a trick when it comes to the income tax schedule—it only applies to your "taxable income." There are lots of special exemptions that reduce how much of your income counts as taxable income. If you save for retirement, the government rewards you by excluding what you save from taxable income.

what are gains from trade

These benefits you get from reallocating stuff to its better uses are called the gains from trade.

difference between tax evasion an tax avoidance

These incentives lead to both legal but wasteful tax avoidance (doing things explicitly to try to reduce the taxes you owe by taking advantage of loopholes in the tax system), and illegal tax evasion (which means not honestly reporting all your income, such as being paid "off the books" and not reporting the income to the IRS).

what does it mean to Exploit the benefits of mass production

These lower opportunity costs due to the benefits of mass production can be another enduring source of comparative advantage, particularly for large producers.

what do price signals coordinate?

These signals help coordinate better outcomes.

what does a price floor do

These two goals reflect the fact that a price floor does two things: It raises prices and it lowers the quantity sold. price floors increase the price, which boosts businesses' profit margins. But this higher price lowers the quantity demanded.

why is price a signal?

They communicate through the price. The sharp increase in demand led the price of quinoa to more than triple in just a few years. That skyrocketing price is a signal, creating a line of communication between buyers and sellers.

what critique is developed from the example of infant industries?

This example illustrates the critique that it can be difficult for governments to identify which industries are likely to mature well if shielded from competition. A related problem is that as infant industries grow, their political power also increases, leading them to pressure governments to keep renewing their "temporary" assistance.

what does "When the United States is a small player, take the world price as given."

This means that the actions of American importers and exporters won't influence the world price much. That is, in the world market, American buyers and sellers are price-takers, which means that they can take the world price as given

when is marginal utility larger or smaller?

This means that your marginal utility may be large when you are poor, but it gets smaller as you get richer.

what is intergenerational mobility? how much economic advantage or disadvantage will be transferred to you?

This suggests focusing on intergenerational mobility—the extent to which your economic circumstances are independent of those of your parents. around half of the economic advantage or disadvantage enjoyed by your parents will be transmitted to you.... BUT Economic disadvantage is similarly transmitted from parents to children. So your parents matter, but your own hard work, your investments, and luck also matter.

support for price gouging

Those who argue to allow price gouging point out that anti-price-gouging laws are a form of a price ceiling. That means they do two things: They lead to a decrease in the quantity supplied and an increase in the quantity demanded, thus creating shortages.

denying for price gouging argument

Those who support anti-price-gouging laws argue that raising prices only benefits businesses because businesses are limited to whatever inventory they have on hand, therefore supply is pretty inelastic. They also argue that price gouging hurts the poor, who are the least able to purchase necessities at higher prices.

how do you analyze the distribution of income

To analyze the distribution of income, we sort families from low to high income, and then divide them into five equal-sized groups, called quintile

how do you get the most output with your given inputs

To get the most output with your given inputs, you should allocate each task to the person with the lowest opportunity cost.

what are trade costs? how are they incurred?

Trade costs are the extra costs—aside from the price—incurred as a result of buying or selling your goods internationally rather than domestically

what does trade cost determine?

Trade costs determine how important international trade is in your sector. It follows that it's unlikely to ever be worth importing or exporting products with high trade costs. On the flip side, there's a lot of international trade in products with low trade costs. And so trade costs determine whether international trade is likely to be a big factor in your market.

what determines whether its worth buying or selling internationally?

Trade costs determine whether it's worth buying or selling internationally.

what two things do trade costs determine?

Trade costs don't just determine what is traded. As the next case study shows, they also determine how much is traded

why have trade costs declined? what has this led our lives to?

Trade costs have declined because of lower trade barriers, closer political integration, improved telecommunications, electronic banking, the internet, and improved rail, sea, and air transportation. And this has led our lives to become increasingly connected with those of folks living in other countries

what leads to specialization

Trading allows people to reallocate tasks so that more output is produced with a lower opportunity cost. And this leads to specialization

what does the us trade policy enforce

U.S. trade policy largely embraces free trade. That conclusion holds even as the future is less clear, as President Trump has argued both for aggressively increasing tariffs, and for eliminating them altogether.

how do you assign workers to tasks

Use comparative advantage to assign workers to tasks.

what are internal markets used to do?

Use internal markets to allocate scarce resources

Where do wage and hours of work go on a graph.

Wage is the price of labor, so it goes on the vertical axis. Hours of work measures the quantity of labor, so that goes on the horizontal axis.

summary of the effects of exports

We export those goods that foreign buyers are willing to pay a lot more for, and this leads the price of goods that we export to rise. That higher price leads domestic sellers to raise the quantity they supply, while domestic buyers reduce the quantity they demand. Exports fill the gap between domestic supply and domestic demand. The higher price increases the producer surplus of sellers, and decreases the consumer surplus of domestic buyers. And because sellers amplify their gains by selling more snowmobiles at the higher price, while buyers minimize their losses by purchasing a smaller quantity, the net effect is for total economic surplus to increase.

why do we trade with foreigners

We trade with foreigners for the same reason we trade with locals. By this telling, the gains from trade created by comparative advantage are the reason for international trade. But even now it should be clear that when comparative advantage drives you to trade with someone—and even if that person is living overseas—you'll both end up better off.

what is wealth?

Wealth refers to all the assets—including savings, cars, a home—that you currently have. Wealth is considered a stock, which is something that is measured at one specific time and represents the amount of assets you have at that time. In contrast, income is a flow, since the money flows in over time.

what determines the distribution of the subsidy

What determines the distribution of the subsidy between buyers and sellers? I bet you guessed it: the price elasticities of demand and supply

what is a binding price ceiling

When a price ceiling prevents the market from reaching the equilibrium price because the highest price that sellers can charge is set below the equilibrium price, economists refer to it as a binding price ceiling.

what is a binding price floor

When a price floor prevents the market from reaching the equilibrium price because the lowest price that sellers can charge is set above the equilibrium price, economists refer to it as a binding price floor.

what happens when domestic sellers export their goods

When domestic sellers export their goods: The price rises to the world price. This higher price leads to a higher quantity supplied by domestic sellers but a lower quantity demanded by domestic buyers. Exports fill the gap between the quantity supplied and the quantity demanded.

what is a price ceiling

When the government sets a maximum price, this is referred to as setting a price ceiling.

what are the two differnt things that can happen when wage goes up?

When the wage goes up, there are two effects: A higher wage raises the marginal benefit of working another hour (that's the substitution effect); and, because leisure is a normal good, it raises the marginal benefit of an extra hour of leisure (that's the income effect). These two forces push in opposite directions.

when is the labor market is perfectly competitive

When there are lots of businesses looking to hire from a pool of many workers with similar skills, the labor market is perfectly competitive

explain how Existing workers may put in more hours make the market labor supply curve upward-sloping

When wages go up, people already working in that occupation may increase the number of hours they work. You already know that is likely to be a small effect, because while higher wages provide a greater incentive to work (the substitution effect), they also increase the demand for leisure (the income effect). So if the wages of hair stylists go up, on average the hours existing stylists work will go up a small amount.

does it matter who gets the subsidy

Whether it's a tax or a subsidy, it's the laws of supply and demand not the laws set by government that determine who bears the economic burden of a tax and who gets the benefit of a subsidy.

does who the tax is levied on matter to the economic effect?

Whether the new soda tax is levied on buyers or sellers, it has the same economic effect! t doesn't matter whether the buyer or seller is assigned by the government to send in the tax; the end result is exactly the same.

what is a quota on sellers detemined by

With a quota on sellers, the resulting price will be determined by what buyers are willing to pay for the limited quantity available.

what determines world price?

World supply and world demand determine the world price. When shirts are traded internationally, the price is determined by the interactions of all the buyers and sellers around the world. That is, the price is determined in the world market by the intersection of world supply and world demand.

why can you get a better deal trading with foreigners

You can get a better deal by trading with foreigners for the same reason that you get a better deal by trading with people within your country. The reason is comparative advantage.

what are imports? why will you choose to do this?

You will choose to import—that is, buy goods or services from foreign sellers—when foreign products are cheaper than their American-made equivalents.

who has more intergeneration mobility with the united states? what level is the united states at?

You've probably heard the United States described as the "land of opportunity." Yet despite this self-image, the United States has less intergenerational mobility than Australia, Canada, France, Germany, or Sweden, and is at a level roughly comparable with the United Kingdom.

what does your labor supply curve depend on

Your labor supply curve depends on the balance of income and substitution effects.

Your labor supply is

Your labor supply is the time you spend working in the market.

Is fairness about the process?

Your sense of fairness may also depend on how fair you find the process by which inequalities are generated. These differences are okay when they are the result of a fair process.

what can a binding ceiling lead to

a binding price ceiling can lead to shortages and queuing.

how do Nonwage benefits, employment subsidies, and income taxes shift the labor supply

an increase in nonwage benefits or subsidies, or a decrease in income taxes, will lead to an increase in labor supply, shifting the curve to the right. And a decrease in nonwage benefits, a decrease in subsidies or an increase in income taxes will cause a decrease in labor supply, shifting the curve to the left.

what is income

by income—it's the money you receive in a period of time, like a year.

labor demand shifters

changes in demand for your product Changes in the price of capital. Better management and productivity gains. Nonwage benefits, subsidies, and taxes.

how is domestic consumer surplus affected by imports and exports?

decrease a bit with imports, increase a lot with exports

when does labor supply increase and decrease?

decreases when wages in competeing jobs rise, increases when wages in comepteing jobs fall

what is the world supply

describes the total quantity of shirts produced by all manufacturers in the world at each price.

disability insurance

developing a work-limiting disability, a tax on employers and workers

who gets the economic benefit ofa subsidy

economic benefit of subsidies is shared between buyers and sellers

extensive margin

extensive margin (which describes the number of people in the workforce—a measure of the extent of work).

what are goods and services, social insurances, and safety net programs funded by? does that increase or decrease inequality?

funded by the government are paid for by tax payers. Tax dollars fund all of that, but because we don't all pay the same amount in taxes, the tax system itself reduces inequality.

workers compensation

getting injured at work, employees are required to buy it

what is medicaid

health care, poor families with dependent children, disabled, elderly

medicare

health insurance for people 65 and older, a tax on workers and employers

what do taxes do?

hey tend to reduce the quantity demanded and the quantity supplied of the taxed good as buyers pay more and sellers receive less

poverty demographic

hows that while poverty afflicts some more than others, no group is immune to it. The top cluster of bars shows that having an income below the U.S. official poverty rate is more common among those who are black or Hispanic. They are about twice as likely to be in poverty compared to those who are white or Asian. Even so, you shouldn't believe the stereotype that those in poverty are mostly minorities. Around three-fifths of all people in poverty are non-Hispanic whites

what happens wehn income effect and substitution effect exactly offsent eachother

if the two effects exactly offset each other, then your individual labor supply curve is vertical,

what is relative abundance, why does it matter?

importantly, it is relative abundance of inputs that matters—whether you have more or less labor relative to capital, land, or sunshine than your trading partners.

what happens to domestic price with imports and exports?

imports the domestic price is lowered, exports it is raised

explain the labor shifter of nonwage benefits, subsidies, and taxes

in reality, hiring workers can be much more expensive than just the wage, because many workers receive nonwage benefits from their employer and their employer makes contributions to benefits programs for them. If any of these other costs change—for example, health insurance becomes more expensive—the labor demand curve will shift. Specifically, if nonwage costs rise, then the labor demand associated with any given wage level will decrease, shifting labor demand to the left. If nonwage costs fall, then the labor demand associated with any given wage level will increase, shifting labor demand to the right.

how are domestic comsumers surplus affected by imports and exports?

increase a lot with imports, decrease a bit with exports

how is the total economic surplus effected by imports and exports?

increased with imports and exports

intensive margin

intensive margin (which describes the number of hours each worker supplies—a measure of how intensively existing workers supply their labor

The _____ principle helps you understand how labor demand shifts when economic conditions change. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

interdependence

what has the same effect as immigration? why?

international trade can have the same effect as immigration. he government currently restricts the number of foreigners immigrating to the United States to shield domestic workers from foreign competition. But even though foreign laborers can't enter the United States at will, foreign labor can—at least to the extent that it is embodied in imports produced by foreign workers. And so trade in goods can have the exact same effects that immigration otherwise might, serving as a source of competition for American labor.

how is the q supplied effected by imports and exports?

it is lowered with imports and raised with exports

what does the knowledge problem mean?

knowledge problem, which is that the knowledge or information you need to make a good decision may be so broadly dispersed that it's not available to any individual decision maker.

unemployment insurance

losing your job through no fault of your own, a tax on employers

supernatural nutrition assistance program (SNAP)

money, low income elderly or disabled

welfare

money, temporary help for people with low income families

equality efficiency trade off

more equal incomes may come at the cost of lower average incomes. Economists refer to this as the equality-efficiency trade-off.

what is the individual labor supply

most economists agree that individual labor supply is relatively inelastic.

what defines poverty?

not universally known. Every country defines poverty somewhat differently, and even within the United States there is more than one definition. But the U.S. government has one official measure of poverty, so that's a good place to start.

social securty

outliving your savings, dying before your kids are grown, a tax on workers and employers ,

What is social insurance?

part of the safety net are government programs that insure you against bad outcomes such as unemployment, illness, disability, or outliving your savings. These programs are called social insurance because it's insurance, but it's provided socially by everyone in society rather than by a private insurance company.p

what are prediction markets

prediction markets, in which people trade contracts whose payoffs are linked to whether an uncertain event occurs.

The _____ measures workers' responsiveness to _____.

price elasticty of supply of labor, wages

what is quantity regulation

quantity regulation—a maximum or minimum quantity that can be sold

how is the q demanded by consumers effected by imports and exports?

raised with imports, lowered with exports

why do seniors aged 65 years and older have lower poverty rates?

seniors aged 65 years and older have low poverty rates, largely because Social Security income is included in measuring income and it provides most retirees with an income above the poverty line.

what is specialization

specialization in which people focus on specific tasks, spending more of their time on what they're relatively good at, and less of their time doing other stuff.

Housing assistance

subsidized rent, low income people particularly families, elderly and disabled

T/F Income is distributed unequally.

t

t/f International trade has been with us, and growing, for centuries.

t

t/f Many other taxes aren't progressive.

t

t/f Some safety net programs are not means-tested, because they are insurance programs designed to cover everyone—the rich and the poor.

t

t/f The higher your cut-off, the greater is your willingness-to-pay for fairness

t

t/f greater equality doesn't always mean less efficiency.

t

t/f his research shows that the neighborhood that you grow up in can have a big impact on your outcomes as an adult.

t

t/f The more people believe in luck, the more the country tends to redistribute.

t

t/f/ Higher wages create an incentive to invest in capital.

t, . But higher wages may also lead you to change how you produce that output, leading you to substitute machinery for labor. . But higher wages may also lead you to change how you produce that output, leading you to substitute machinery for labor.

t/f/ Higher wages lead more people to enter the labor force.

t, The higher the wage is, the larger will be the share of the population for whom the benefits of joining the workforce exceed the costs. As a result, higher wages lead more people to decide to supply their labor to the market.

what will adding a tariff on imports do?

tariff on imports will: ↑Price, which will: ↓Quantity demanded by domestic buyers and ↑Quantity supplied by domestic sellers, Causing ↓imports.

earned income tax credit (EITC)

tax rebates, working families with children

explain rebuttal to the argument that international trade needs limited becasuse Trade shouldn't be a way to skirt regulations.

that businesses must meet certain minimum standards. These standards drive costs up, but we get something in return—namely, safer products, a cleaner environment, and a marketplace that treats everyone fairly. Opponents argue that the labor or environmental standards that are appropriate for a rich country like the United States are not appropriate for poorer nations. They fear that restricting trade with poor countries can create even more poverty.

what do markets do?

that's what markets do: They reallocate stuff—resources, goods, and services—to better uses, generating gains from trade When I say that markets allocate "stuff," think about that idea broadly—they allocate all sorts of resources, goods, and services, including time.

what is the domestic supply curve?

the domestic supply curve illustrates the quantity of goods that domestic producers plan to sell at each price

what is the effect of chaniging wages on individual labor? in what direction is it sloping?

the effect of changing wages on individual labor supply is relatively small. So the individual labor supply curve is nearly vertical for most people. But remember that some people won't work at all if the wage is too low. In fact, higher wages raise the likelihood that people will work,

what is price gouging

the idea of raising prices at moments of high demand

what is the key to the elasticity of supply?

the key to the elasticity of supply is how flexible the seller is.

when will the price sellers recieve fall by less

the price sellers receive will fall by less when supply is relatively more elastic. nd so the more elastic a seller's supply curve is, the smaller their share of the economic burden

what is the statutory burden

the statutory burden of a tax describes the burden of being assigned by the government the responsibility of sending a tax payment.

backbending labor supply curve

the substitution effect dominates at low wages and the income effect dominates at higher wages.

what is the world price

the world price, which is the price that a traded good sells at in the world market. This world price is the price that consumers pay to buy imported shirts, and the price that producers can get for exporting their shirts.

what is the scale effect

there's a scale effect: When the price of capital goods (or any of your inputs) declines, your business can produce output more cheaply, so at a given price, you will sell a larger quantity. That is, you'll produce at a larger scale, which may require more workers, increasing your business's labor demand.

what does the supply curve look like for the labor market

thus, the quantity of hours supplied in the market for hair salons typically rises with the wage. An upward-sloping labor supply curve is just the law of supply, applied to the labor market.

t/f Everyone has a comparative advantage.

true

when will buyers bear more of the economic burden

when the demand is inelastic. when the In this case, buyers are not very responsive to changes in price relative to sellers. As a result, a larger share of the economic burden falls on buyers.

what is the world demand

world demand describes the total quantity of shirts demanded across all shirt buyers in every country, at each price.