Unit 3 Pt. 2 Flashcards
(29 cards)
Consumer Surplus
CS = consumer’s willingness to pay - price
Producer Surplus
PS = price - producer’s willingness to provide
Total Surplus
TS = consumer’s willingness to pay - producer’s willingness to provide
Subsidies
Work as a negative tax, increasing the seller’s price.
- Encourage overproduction
- Increase PS
- Increase CS
- A gov. cost (always greater than the gain in CS and PS)
Price Ceiling
A legal max. on the price per unit that a producer can receive.
- Excess demand will exist
- Market will under produce
- Decrease PS
- Some PS is transferred to the consumer
Deadweight Loss
Reduction in net economic benefit or surplus due to inefficiencies.
GOvernment Intervention
- Under normal competitive conditions, any gov interventions will cause deadweight loss
- Most efficient - limp sum payments to segment of society it desires to aid
- Politically undesirable - Why should one segment of society get smth for free
Price Floor
A legal min on the price per unit that a producer can receive (ie minimum wage)
- Excess supply will exist
- Market will under consume
- Decrease of CS
- Some CS is transferred to the producer
- Deadweight loss
Positive Externalities
Benefits that spill over to individuals who didn’t directly pay for the good.
EX. Education not only benefits the individual receiving it but also society by promoting a more informed, productive workforce.
Negative Externalities
When the consumption or production of a good imposes costs on third parties who are not involved in the transaction.
EX. Pollution from industrial production is a negative externlaity that effects public health + environment, even though the costs of damage are not borne by producers or consumers of the polluting goods.
Non-Excludability
Public goods are non-excludable, meaning that individuals cannot be excluded from using the good once its provided. Often leads to the “free rider” problem, where ppl benefit from the good w/out contributing to its cost.
Non-Rivalry
One person’s use of a good does not reduce its availability for others. EX. Clean air, public parks
Total Employment
The total # of employed workers, part-time or full-time.
The Labour Force
Combination of employed and unemployed workers.
Unemployment
The # of workers willing, able, + seeking jobs but not actually working.
Cost of Unemployment
- Affect families in financial + personal ways
- Difficulty in school, family separation, abuse, crime - Some delayed purchases, savings are depleted or even homelessness
Frictional Unemployment
Short-term unemployment that occurs while workers search for the jobs best suited for their skills + interests.
- Ppl leaving one job in search for another
- Ne labour-force entrants - students, reentrants
Structural Unemployment
Mismatch between job seekers & the type of jobs available.
- Mismatch of skills and/or labour market adjustment
- Changes in demand in tech skills will displace, while some workers will be unwilling or unable to move freely around to keep or find a job
Seasonal Unemployment
-When workers lose their jobs due to a change in seasons.
Cyclical Unemployment
Caused by an economic contraction.
Natural Unemployment
Unemployment in the absence of cyclical unemployment. 6-7%
Full Employment
Employment in the absence of cyclical unemployment.
Youth Unemployment
Rate of young workers always higher than the national average. Currently 16% - almost 2x national average.
Youth Obstacles
- Systematic barriers
- Lack of meaningful opportunities
- Lack of accessible + affordable transportation
- Racism + structural discrimination
