micro ch 6
Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the (i)supply is more elastic than the demand. (ii)demand in more elastic than the supply. (iii)tax is placed on the sellers of the product. (iv)tax is placed on the buyers of the product.
(ii) only
Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about
1 to 3 percent.
A price ceiling is
A legal maximum on the price at which a good can be sold
A price floor will be binding only if it is set
above the equilibrium price, causing a surplus.
Long lines
are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.
If a tax is imposed on a market with inelastic demand and elastic supply, then
buyers will bear most of the burden of the tax.
A $3 tax levied on the buyers of shoes will cause the
demand curve for shoes to shift down by $3.
Tax incidence
depends on the elasticities of supply and demand
Which of the following is correct? A tax burden
falls more heavily on the side of the market that is less elastic.
tax incidence
is the manner in which the burden of a tax is shared among participants in a market.
An example of a price floor is
minimum wage
The minimum wage is an example of a
price floor
A tax on sellers will shift the
supply curve upward by the amount of the tax
If a price floor is not binding, then
there will be no effect on the market price or quantity sold.
A $2.00 tax levied on the sellers of birdhouses will shift the supply curve
upward by exactly $2.00.