AP Economics Chapter 6-7

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Created Oct 23, 2013
by
kehanchen

 

 
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1
price ceiling
 
the legislated maximum of price
2
price floor
 
the legislated minimum of price
3
binding& not binding
 
binding- when the price ceiling or price floor has effect on the market
not binding-when...
4
When the government imposes a binding price ceiling on a competitive market
 
a shortage of the good arises, and sellers must ration the scarce goods among the large number...
5
Two factors of inefficiency caused by price celing
 
1.long lines waste buyers' time
2.Discrimination according to seller bias(the good...
6
rent control
 
places a ceiling on rents that landlords may charge their tenants.
7
the effect of binding price floor
and binding price ceiling
 
binding price ceiling causes shortage
binding price floor causes surplus
8
long run effect of rent control
 
1.supply decreases because landlords are less willing to offer more  apartments or...
9
minimum-wage
 
laws dictate the lowest price for labor that any employer may pay
10
the impact of minimum-wage
 
Highly skilled and experienced workers are not affected because their equilibrium wages are...
11
long-term effect of minimum-wage
 
1.Company hires less workers
2. Encourage teenagers to drop out of school
3....
12
wage subsidies's positive and negative effect
 
Positive:Won't hurt those they are trying to help in long term.
Negative: Cost the...
13
which term refers to how the burden of a tax is distributed among the various people who make...
 
tax incidence
14
tax wedge
 
the difference between the price buyers paid and the price sellers receive
15
elasticity and tax incidence
 
a tax burden falls more heavily on the side of the market that is less elastic(more vertical)
16
Chapter 7
 
Consumers, producers, and the efficiency of markets
17
willingness to pay
 
measures how much that buyer values the good
18
consumer surplus
 
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for...
19
marginal buyer
 
the buyer who would leave the market first if the price were any higher
20
how to measure the consumer surplus in a market
 
the area below the demand curve and above the price measures the consumer surplus in a market
21
producer surplus
 
measures the benefit sellers receive from participating in a market
22
how to calculate producer surplus
 
the area above supply curve and below the price
23
total surplus
 
=consumer surplus+producer surplus
=value to buyers-cost to sellers
24
If an allocation of resources maximizes total surplus, 
 
we say that the allocation exhibits efficiency
25
equility
 
concerns whether the various buyers and sellers in the market have a similar level of economic...
26
free markets
 
1.allocate the supply of goods to the buyers who value them most highly, as measured by their...
27
The equilibrium outcome is
 
an efficient allocation of resources
28
Policy of leaving well enough alone goes by the French expression:
 
laissez faire
29
laissez faire
 
allow them to do
30
In free market, what does the planner's job?
 
Adam Smith's invisible hand of the marketplace
31
market power
 
the ability to influence price
can cause markets to be inefficient because it keeps...
32
externalities
 
side effects in market except the decisions of buyers and sellers
33
market failure
 
the inability of some unregulated markets to allocate resources efficiently
example:...

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