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Unformatted text preview: Econ 2: Principles of Economics Chapter 6 Questions for Review 3. When the price of a good is not allowed to bring supply and demand into equilibrium, some alternative mechanism must allocate resources. If quantity supplied exceeds quantity demanded, so that there is a surplus of a good as in the case of a binding price floor, sellers may try to appeal to the personal biases of the buyers. If quantity demanded exceeds quantity supplied, so that there is a shortage of a good as in the case of a binding price ceiling, sellers can ration the good according to their personal biases, or make buyers wait in line. 5. Removing a tax paid by buyers and replacing it with a tax paid by sellers has no effect on the price that buyers pay, the price that sellers receive, and the quantity of the good sold. 7. The burden of a tax is divided between buyers and sellers depending on the elasticity of demand and supply. Elasticity represents the willingness of buyers or sellers to leave the market, which in turns depends on their alternatives. When a good is taxed, the side of the market with fewer good alternatives cannot easily leave the market and thus bears more of the burden of the tax. bears more of the burden of the tax....
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