CHAPTER 6: PRICE FLOORS AND CEILINGS

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4 Terms

1
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Price ceiling

a legal maximum on the price at which a good can be sold

  • cause SHORTAGES


2
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Price floor

a legal minimum on the price at which a good can be sold

  • cause SURPLUS


3
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Tax incidence

how the burden of a tax is distributed among the various people in the economy.

4
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Who does the tax fall on?

Whichever side of the market that is LESS ELASTIC