Micro 5-7
A tax imposed on the sellers of a good will raise the
Price paid by buyers and lower the equilibrium quantity
Market power refers to the
ability of market participants to influence price
A price floor will be binding only if it is set
above the equilibrium price
Cross-price elasticity demand implies that
any rise in price above that represented by the demand curve will result in a quantity demanded of zero
Producer surplus is the area
below the price and above the supply curve
A good will have a more inelastic demand, the
broader the definition of the market
When a buyers willingness to pay for a good is equal to the price of the good, the
buyer is indifferent between buying the good and not buying it
A tax on buyers will shift the
demand curve downward by the amount of tax
A tax imposed on the buyers of a good will lower the
effective price received by sellers and lower the equilibrium quantity
A minimum wage that is set below a markets equilibrium wage will
have no impact on employment
If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will
increase consumer surplus
Economists say that a market where goods are not consumed by those valuing the goods most highly is
inefficient
An increase in price causes an increase in total revenue when demand is
inelastic
Inefficiency exists in an economy when a good is
not being consumed by buyers who value it most highly
A legal maximum on the price at which a good can be sold is called a
price ceiling
A legal minimum on the price at which a good can be sold is called a
price floor
A perfectly inelastic demand implies that buyers
purchase the same amount as before when the price rises or falls
A tax on sellers will shift the
supply curve upward by the amount of tax
A minimum wage that is set above a markets equilibrium wage will result in an excess
supply of labor, that is, unemployment
For a good that is a necessity, demand
tends to be inelastic
Generally, a firm is more willing and able to increase quantity supplied in response to a price change when
the relevant time period is longer rather than short
Producer surplus directly measures
the well-being of sellers
The study of how the allocation of resources affects economic well-being is called
welfare economics