Chapter 4&6
in the housing market, rent control causes what to happen
QS to fall & QD to rise
one econimist has argued that rent control is the best way to destroy a city other than bombing
Rent control eliminates the incentive 2 maintain buildings; leads to deteoration of the city
Price controls
They are enacted when policy makers believe there is unfairness in the market
a surplus
a binding price floor cause what?
demand curve
a graph of the relatinship between the price of a good and the quantity demanded
market
a group of buyers and sellers where of particular goods and services
price ceiling
a legal maximum price at which a good or service can be sold
price floor
a legal minimum price at which a good can be sold
competitive market
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
it will have no affect on the market price
a price ceiling that is not binding will have what kind of affect?
it leads to a surplus
a price floor is binding if what?
shortage
a situation in which quantity demanded is greater than quantity supplied
surplus
a situation in which quantity supplied is greater than quantity demanded
equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
a min. wage set above a markets equilibrium wage results in what?
a surplus in workers, unemployment
the earned income tax credit is an example of what
a wage subsidy
True
an inferior good might be a bus ride
an example of a price floor
minimum wage
price
movement along the supply curve
advocates of the min wage argue what?
point out the low annual income tax for those who work min wage
what is not a rationing mechanism used by landlords in cities
price
True
price controls can casue inequalities of their own
if the number of firms selling tv's decreasesd
suppose the government has imposed a price ceiling on tv's. what event could transform the price ceiling from one that is not binding into one that is binding
quantity demanded
the amount of a good that buyers are willing and able to purchase
law of supply and demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
law of demand
the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
law of supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
tax incidence
the manner in which the burden of a tax is shared among participants in a market
equilibrium price
the price that balances quantity supplied and quantity demanded
equilibrium quantity
the quantity supplied and the quantity demanded at the equilibrium price
when opec raised the price of crude oil in the 1970's
the supply of gas decreased
in the 1970's long lines at gas stations in the US were primarily a result of the fact that what happened?
the us gov't maintains a price ceiling on gasoline
when policymakers set prices by legal degree...
they obscure the signals that normally guide the allocation of society's resources
an outcome that results from a price ceiling of price floor
undesirable rationing mechanisms
Rationing by long lines is an example of what and why?
what: URM why: inefficient, wastes buyers time
complements
when a FALL in the price of one good RAISES the demand for another good
when a binding price celing is put in place
when does a shortage result?
when it is below the equilibrium price
when is a price ceiling binding?
what is a correct statement about the labor markert?
workers determine the supply of labor, and firms determine the demand for labor
