Microeconomics - Price Controls and Taxes Chapter 6

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Flashcards covering key concepts related to price controls and taxes in microeconomics.

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12 Terms

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Price Ceiling

A legal maximum on the price at which a good can be sold, causing a shortage when below equilibrium.

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Price Floor

A legal minimum on the price at which a good can be sold, causing a surplus when above equilibrium.

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Tax Incidence

The manner in which the burden of a tax is shared among participants in a market.

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Binding Price Control

A price control that has an effect on the market outcome; for a price ceiling, it's below equilibrium; for a price floor, it's above equilibrium.

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Shortage

A situation that arises when the quantity demanded exceeds the quantity supplied at a given price.

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Surplus

A situation that arises when the quantity supplied exceeds the quantity demanded at a given price.

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Rent Control

Local ordinances that limit rent increases in rental housing.

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Minimum Wage

The lowest legal price that can be paid for labor, which is aimed at protecting low-income workers.

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Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

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Elasticity of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good.

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Government Intervention

Actions taken by the government to affect the economy, often through price controls or taxes.

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Market Equilibrium

The point at which the quantity demanded equals the quantity supplied.