ECO100 Midterm 2

Hunter College

Natural Experiment

When external circumstances create conditions similar to an experiment without manipulation by researchers

Randomized Control Trial

Involves researchers assigning subjects to a treatment and control group

Price Ceiling

A legal maximum price that can be charged for a good or service.

Price Floor

A legal minimum price that must be paid for a good or service.

Unitary Elasticity

Elasticity =1, indicating that a percentage change in price results in an equal percentage change in quantity demanded or supplied.

Deadweight Loss

Loss of economic efficiency cause by a discrepancy between supply and demand, often due to market distortions like taxes or price controls.

Social Marginal Cost (SMC)

The cost incurred by society as a whole for producing one additional unit of a good or service, taking into account both private and external costs.

Social Marginal Benefit (SMB)

The additional benefit to society from consuming one more unit of a good or service, including both private and external benefits.

Externalities

The costs or benefits that affect third parties who are not directly involved in a transaction, leading to a divergence between private and social costs or benefits.

Quantity Rationing

First Come First Serve, when the price isn’t allowed to adjust

Price Ceiling

Maximum Price allowed by law to be charged for a good or service, intended to protect consumers from excessively high prices.

Quantitative Restrictions

Limit on aupply via system of licenses/quotas, middle man captures economic rent

Monopsony

A market structure where a single buyer controls the market, often leading to lower prices for suppliers.

Shortage

A situation where the demand for a good or service exceeds its supply, often resulting from price controls or increased demand.

Surplus

A situation where the supply of a good or service exceeds its demand, often leading to excess inventory or lower prices.

Quota rent

The economic benefit that accrues to the holder of a quota, which arises when the market price exceeds the cost of production, allowing for profits above normal returns.

Marginal Cost

Change in total cost of production divided by change in total production