Exam #2 Flashcards
A maximum price that sellers can charge.
Price Ceiling
A price ceiling that prevents the market from reaching the market equilibrium price.
Binding price ceiling
A minimum price that sellers can charge
Price Floor
A price floor that prevents the market from reaching the equilibrium price.
Binding price floor
A minimum or maximum quantity that can be sold
Quantity regulation
A requirement to buy or sell a minimum amount of a good
Mandate
A limit on the maximum quantity of a good that can be sold
Quota
A tax assessed as a percentage of the price of a product
Percentage Tax
A tax assessed as a dollar amount, independent of the price of a product.
Per-Unit Tax
The total amount of money collected through a tax
Tax revenue
The burden created by the change in after-tax prices faced by buyers and sellers
Economic Burden
The division of the economic burden of a tax between buyers and sellers
Tax Incidence
The burden of being assigned by the government to send a tax payment.
Statutory Burden
A payment made by the government to those who make a specific choice.
Subsidy
Describes what is happening, explaining why, or predicting what will happen.
Positive Analysis
Prescribes what should happen, which involved value judgements
Normative Analysis
The total benefits minus total costs flowing from a decision.
Economic Surplus
An outcome is more economically efficient if it yields more economic surplus
Economic Efficiency
The efficient outcome yields the largest possible economic surplus
Efficient Outcome
An outcome yields greater equity if it results in a fairer distribution of economic benefits
Equity
Buyers and sellers exchange money of goods only if they both want to
Voluntary Exchange
The economic surplus you get from buying something
Consumer surplus
The economic surplus you get from selling something
Producer Surplus
Allocating goods to create the largest economic surplus, which requires that each good goes to the person who’ll get the highest marginal benefit from it.
Efficient Allocation
Producing a given quantity of output at the lowest possible cost, which requires producing each good at the lowest marginal cost.
Efficient Production