Microeconomics - Price Controls and Taxes Chapter 6

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

Price Ceiling

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

Price Floor

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

Tax Incidence

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

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.

Shortage

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

Surplus

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

Rent Control

Local ordinances that limit rent increases in rental housing.

Minimum Wage

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

Elasticity of Demand

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

Elasticity of Supply

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

Government Intervention

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

Market Equilibrium

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