Supply, Demand & Government Policies: Price Controls and Taxes

These flashcards cover key vocabulary related to supply, demand, price controls, and taxation based on the lecture notes.

Price Ceiling

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

Price Floor

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

Binding Constraint

A price control that is set below the equilibrium price, leading to shortages.

Not Binding

A price control that is set above the equilibrium price, having no effect on the market.

Shortage

A situation in which quantity demanded exceeds quantity supplied at a given price.

Surplus

A situation in which quantity supplied exceeds quantity demanded at a given price.

Rent Control

A form of price ceiling aimed at making housing more affordable for lower-income families.

Minimum Wage

The lowest legal price for labor that any employer may pay.

Tax Incidence

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

Elastic Supply

A situation where the quantity supplied is responsive to changes in price.

Inelastic Demand

A situation where the quantity demanded is not very responsive to price changes.

Rationing Mechanisms

Methods used to allocate scarce goods when supply is limited.

Fair Labor Standards Act of 1938

Legislation that established minimum wage and overtime pay standards.

Market Outcomes

Results of interactions between supply and demand in a competitive market.

Government Revenue Source

Taxation imposed by the government to fund public projects and services.

Public Projects

Government-funded initiatives such as infrastructure, education, and defense.