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17 Cards in this Set
- Front
- Back
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1. What is a price control |
Government is setting a limit on price |
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2. What are some price controls that we have? |
We have a price floor (minimum wage) We have a price ceiling (rent control) |
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What is one effect of the rent control? |
It creates a market shortage that does not fix itself (because it can’t. the market isn’t free anymore.) There are too much quantity demand and not enough quantity supplied. |
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4. Normally, if the market price is lower than equilibrium, what would happen in a free market? |
The buyers and sellers would compete and push the price up toward equilibrium. |
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What happens if they push the price up past equilibrium? |
Then there would be a market surplus and there would naturally be pressure to push the price back down toward equilibrium. |
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6. Who gains from rent control? |
Some renters gain. (the ones that still have a place to stay) |
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7. Who loses from rent control? |
The landlords lose because they can’t get the amount they want or because they have to spend time and effort circumventing the law (converting to Airbnb, etc)
Some renters lose because they no longer have a place to stay (and might’ve been willing to pay market price but can’t because it’s illegal) |
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What is deadweight loss? |
It is the loss of happiness (consumer and producer surplus) that no one gets. Renter and landlord want to trade but can’t. |
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Do economists generally like minimum wage and rent control? |
No. Generally, economists think there would be less market distortion if they gave direct market assistance instead (earned income tax credit for those who aren’t making enough, and housing vouchers for those who cannot afford rent.) |
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When the demand curve shifts to the right, that is an increase in demand. What is it called when we move right along the demand curve (without shifting the demand curve)? |
An increase in QUANTITY demanded |
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What is consumer surplus? |
The extra happiness of the buyer (when they pay less than they were willing to pay). (if I were willing to pay 20$ and I only had to pay 15$, then I saved $5) |
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What is producer surplus? |
The extra happiness of the seller when the seller receives MORE than they were willing to sell for. |
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Minimum wage is a price |
floor |
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What are the consequences of minimum wage? |
There can be a market surplus of workers (more unemployment) (Too many workers (Qs) and not enough jobs (Qd))
Some workers gain because they are now paid more for work. Some workers lose because they no longer have a job And the employers lose because they have to pay more |
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How can tariffs help domestic workers? |
It creates demand for them |
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What is a tariff? |
It’s a tax on imported products |
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What is a quota? |
A quota is a limit or ban on foreign products. |
