Economics Review for Test 2 - Economics Review for Test...

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Economics Review for Test 2 (6,7,8,10,21) Chapter 6 Key Terms Price Ceiling - a legal maximum price for a good (ceiling above E* price is not binding) Price Floor - a legal minimum price for a good (floor below E* price is not binding) Tax Incidence - the manner in which the burden of a tax is shared among participants in a market Tax on buyers shifts the demand curve down, tax on sellers supply shifts upward Buyers pay more for a good, sellers receive less Elasticity and Taxes Taxes rarely shared equally between buyers and sellers A tax burden falls more on the side of the market that is less elastic Chapter 7 Key Terms Willingness to pay - the maximum amount that a buyer will pay for a good Consumer surplus - amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it Cost - the value of everything a seller must give up to produce a good Producer Surplus - amount a seller is paid for a good minus the seller’s cost of providing it Efficiency
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