Econ Exam 2, 3, and Final Exam Cheat Sheets .pdf

Econ Exam 2, 3, and Final Exam Cheat Sheets .pdf - Ch 6...

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Ch. 6 Taxes and Subsidies Tax Burden - who pays for tax (buyer or producer) depends on elasticity of S&D, not tax laws When demand is more elastic than supply, demanders pay less of the tax than sellers. When supply is more elastic than demand, suppliers pay less of the tax than buyers. Subsidies - Payments the gov. makes to either consumers or producers (no different). Taxpayers pay for subsidies Taxes and subsidies create DWL. both can change the eq level of output Tax on Sellers Tax Rev. = Tax x Q DWL - Deadweight Losses Are Larger the More Elastic the Demand Curve. If the demand curve is inelastic, a tax will not deter as many trades. Tax will not cause a deadweight loss if supply or demand are perfectly inelastic. 185bccdcdabacccbaddbbcdaadddcdcdc Ch. 7 Price: Signals, Speculation, and Prediction Spot Market - Current market price (spot price) Futures market - market for futood Price of good tells you: (1) value of good to consumers, (2) cost of producing (3) scarcity of good Futures Contracts CONTRACT: $200x500=100k FUTURE: $210x500=105k Cash Settlement : $5k and no trade, the person who agrees to pay will receive the cash, if the future price is lower than the person who who was going to purchase does not make a profit When supply of good increases: supply of its waste product (by-product) increases, price fall, and sales increase A price is a signal wrapped in an incentive If prices go down, we don’t need as much of this product here. If prices go up, send more products here. If the price goes up it’s a signal, this becomes an incentive for sellers to send more products. Profits are higher in industries that consumers want expanded. Losses are higher in industries that consumers want contracted. 380babbdbadcaddbddaabbbddcdcdcaab Ch. 8 Price Ceiling and Floors Rent Controls - Regulation that prevents rent from rising to equilibrium. In the long run, fewer new apartments will be built, housing quality will reduce, and increases costly search. A price ceiling, worsens in LR. (some mutually profitable trades are illegal and therefore benefits are never realized) Time staying in line value wasted x q price ceiling is the maximum price that can be charged, create creates shortages.. If prices are not allowed to rise bc of a price ceiling then suppliers will compensate for the lower price by decreasing the quality of goods. price floor is the minimum price that can be charged, they create surpluses. effective (or binding) price floor is one that is set above equilibrium price. If firms are unable to lower prices bc of a price floor, firms will often compete by raising quality. effective (or binding) price ceiling is one that is set below equilibrium price, they cause quantity demanded to exceed quantity supplied, and consumers pay a total price in excess. A binding price ceiling creates lines, black markets, and consumers unable to find any gas to purchase at a legal price. A non-binding price ceiling will have neither a surplus or shortage.
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