Econ 105C Fall 2023 Problem Set 2

non-binding price floor

Graphical demonstration without impact on market equilibrium

binding price floor

Graphical demonstration with impact on market equilibrium

consumer surplus

The difference between the price paid by consumers and the maximum price they are willing to pay

producer surplus

The difference between the price received by producers and the minimum price they are willing to accept

deadweight loss

The loss of economic efficiency that occurs when the market equilibrium is not achieved

consumer tax

Tax imposed on consumers, affecting market demand curve and equilibrium prices and quantities

demand curve

Graphical representation of the relationship between the price of a good and the quantity demanded

supply curve

Graphical representation of the relationship between the price of a good and the quantity supplied

inelastic demand

Demand that is less responsive to price changes

elastic supply

Supply that is more responsive to price changes

tax burden

The portion of a tax that is borne by a specific party

seller tax

Tax imposed on sellers, affecting market prices and quantities

consumer tax

Tax imposed on consumers, affecting market prices and quantities

tax burden shift

Transfer of tax burden from one party to another

cigarette tax

Tax imposed on each pack of cigarettes sold

supply and demand diagram

Graphical representation of the interaction between supply and demand in a market

price received by producers

The amount of money received by producers for each unit sold

price paid by consumers

The amount of money paid by consumers for each unit purchased

quantity of cigarettes sold

The number of cigarettes sold in the market

consumer surplus

The difference between the maximum price consumers are willing to pay and the price they actually pay

producer surplus

The difference between the minimum price producers are willing to accept and the price they actually receive

total surplus

The sum of consumer surplus and producer surplus

market demand equation

Equation representing the relationship between price and quantity demanded in a market

market supply equation

Equation representing the relationship between price and quantity supplied in a market

equilibrium price

The price at which quantity demanded equals quantity supplied

equilibrium quantity

The quantity at which quantity demanded equals quantity supplied

price floor

Minimum price set by the government for a good or service

consumer surplus

The difference between the maximum price consumers are willing to pay and the price they actually pay

producer surplus

The difference between the minimum price producers are willing to accept and the price they actually receive

total surplus

The sum of consumer surplus and producer surplus

deadweight loss

The loss of economic efficiency that occurs when the market equilibrium is not achieved

price control policy

Government policy that directly controls the price of a good or service

tax policy

Government policy that imposes taxes on goods or services

tax revenue

The total amount of money collected by the government from a tax

deadweight of the tax

The loss of economic efficiency caused by a tax