136PART TWOSUPPLY AND DEMAND I: HOW MARKETS WORKprice ceiling, p. 118price floor, p. 118tax incidence, p. 129Key Concepts1.Give an example of a price ceiling and an example of aprice floor.2.Which causes a shortage of a good—a price ceiling or aprice floor? Which causes a surplus?3.What mechanisms allocate resources when the price of agood is not allowed to bring supply and demand intoequilibrium?4.Explain why economists usually oppose controls onprices.5.What is the difference between a tax paid by buyers anda tax paid by sellers?6.How does a tax on a good affect the price paid bybuyers, the price received by sellers, and the quantitysold?7.What determines how the burden of a tax is dividedbetween buyers and sellers? Why?Questions for Review1. Lovers of classical music persuade Congress to impose aprice ceiling of $40 per ticket. Does this policy get moreor fewer people to attend classical music concerts?
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.