Principles of Economics- Mankiw (5th) 132

Principles of Economics- Mankiw (5th) 132 - 136 PA R T T W...

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136 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK price ceiling, p. 118 price floor, p. 118 tax incidence, p. 129 Key Concepts 1. Give an example of a price ceiling and an example of a price floor. 2. Which causes a shortage of a good—a price ceiling or a price floor? Which causes a surplus? 3. What mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium? 4. Explain why economists usually oppose controls on prices. 5. What is the difference between a tax paid by buyers and a tax paid by sellers? 6. How does a tax on a good affect the price paid by buyers, the price received by sellers, and the quantity sold? 7. What determines how the burden of a tax is divided between buyers and sellers? Why? Questions for Review 1. Lovers of classical music persuade Congress to impose a price ceiling of $40 per ticket. Does this policy get more or fewer people to attend classical music concerts?
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