p.18
Per-Unit Subsidy on Goods and Services
What is an example of a consumption subsidy?
Subsidies on buying residential flats.
p.8
Minimum Price Control (Price Floor)
What happens to total revenue when the price floor is increased from $16 to $20 for good X?
Total revenue changes based on the quantity sold at the new price floor.
p.7
Differences Between Scarcity and Shortage
What causes unemployment in Country A?
The wage rate is set above equilibrium, leading to a surplus of labor.
p.19
Subsidy Benefit Distribution
How does the subsidy affect consumers' price?
Equilibrium price decreases from $10 to $8, so consumers pay $2 less per unit.
p.15
Tax Burden Distribution
What determines the distribution of the tax burden between consumers and producers?
The elasticity of demand and elasticity of supply.
p.21
Subsidy Benefit Distribution
What happens when Ed < Es?
Consumers' subsidy benefit is greater than producers' subsidy benefit.
p.2
Effects of Price Controls on Market Dynamics
How does rent control affect the quantity of rental housing units?
Rent control would reduce the quantity of rental housing units.
p.2
Effects of Price Controls on Market Dynamics
What is a likely consequence of rent control on rental housing availability?
There would be a shortage of rental housing units.
p.12
Per-Unit Tax on Goods and Services
What are sales taxes?
Taxes imposed on the sale or purchase of goods and services.
p.15
Tax Burden Distribution
What occurs when the elasticity of demand (E_d) is greater than the elasticity of supply (E_s)?
Producers' tax burden is greater than consumers' tax burden.
p.10
Effects of Price Controls on Market Dynamics
What is the relationship between price increase and quantity change in elastic demand?
Percentage increase in price is less than percentage decrease in quantity.
p.21
Subsidy Benefit Distribution
What determines the distribution of subsidy benefits between consumers and producers?
The elasticity of demand and the elasticity of supply.
p.24
Effects of Price Controls on Market Dynamics
What are the effects of price control (price ceiling and price floor) on a good?
They affect the price, quantity, and total revenue of the good.
p.2
Effects of Price Controls on Market Dynamics
What is one effect of rent control on poor people?
Poor people would be able to rent a living unit more easily.
p.7
Minimum Price Control (Price Floor)
What is the relationship between demand for labor and unemployment?
Stimulating demand for labor can reduce unemployment.
p.10
Effects of Price Controls on Market Dynamics
How does total revenue change with inelastic demand?
Total revenue will increase.
p.20
Per-Unit Subsidy on Goods and Services
What happens to the supply of a good with the provision of a unit subsidy?
The supply of the good increases.
p.24
Differences Between Scarcity and Shortage
How can the concepts of shortage and surplus explain real-world phenomena?
They help in understanding market dynamics and resource allocation.
p.21
Subsidy Benefit Distribution
What is the effect on price when a per-unit subsidy is applied?
Price decreases by the amount of the per-unit subsidy.
p.19
Subsidy Benefit Distribution
What are the steps to calculate the share of subsidy benefit?
1. Shift the supply curve. 2. Determine new price and quantity. 3. Focus on new quantity for consumers' benefit. 4. Focus on new quantity for producers' benefit.
p.14
Per-Unit Tax on Goods and Services
How does a sales tax affect market price and quantity transacted?
Market price increases while the quantity transacted decreases.
p.15
Tax Burden Distribution
What does it mean if supply is more elastic than demand?
It is easier for producers to shift the tax burden to consumers.
p.15
Tax Burden Distribution
What does it indicate if demand is more elastic than supply?
It is more difficult for producers to shift the tax burden to consumers.
p.14
Per-Unit Tax on Goods and Services
What happens to producers' total revenue net of tax after a sales tax is imposed?
It decreases, as both the net price and quantity transacted drop.
p.19
Subsidy Benefit Distribution
How is the total amount of subsidy provided by the government calculated?
Total subsidy = per-unit subsidy x quantity transacted.
p.21
Subsidy Benefit Distribution
What is the outcome when Ed = Es?
Consumers' subsidy benefit equals producers' subsidy benefit.
p.9
Quantity Intervention: Quota
What should the quota limit be in relation to the equilibrium quantity?
The quota limit should be lower than the equilibrium quantity.
p.9
Quantity Intervention: Quota
What happens to the quantity supplied when the price is below the quota limit?
Sellers will sell less than the quota limit and will not use up the quota.
p.16
Per-Unit Tax on Goods and Services
What is the effect of a $3 per unit sales tax on good X?
It alters the equilibrium price and quantity.
p.7
Minimum Price Control (Price Floor)
How can the total income of workers change after an increase in demand for labor?
Total income of workers may increase as more workers are employed.
p.13
Tax Burden Distribution
What steps are involved in determining the tax burden distribution?
1. Shift the supply curve. 2. Determine price and quantity. 3. Focus on new quantity for consumers' tax burden. 4. Focus on new quantity and vertical distance for producers' tax burden.
p.12
Per-Unit Tax on Goods and Services
What is an ad valorem sales tax?
A tax imposed as a certain percentage of the price of the good.
p.9
Quantity Intervention: Quota
What is the effect of a quota on the supply curve of good X?
The supply curve becomes kinked at the quota limit.
p.6
Minimum Price Control (Price Floor)
How does a price floor affect total revenue when demand is elastic?
Total revenue falls because the percentage increase in price is less than the percentage decrease in quantity.
p.22
Minimum Price Control (Price Floor)
How does total revenue (TR) react to an effective price floor?
TR may increase or decrease depending on the price elasticity of demand.
p.22
Differences Between Scarcity and Shortage
What is the difference between scarcity and shortage?
Shortage results from fixing the price below equilibrium, while scarcity exists even at equilibrium.
p.18
Per-Unit Subsidy on Goods and Services
How does a per-unit subsidy affect the supply curve?
It shifts the supply curve downwards by the amount of the subsidy.
p.1
Effects of Price Controls on Market Dynamics
What are the effects of a per-unit subsidy on price and quantity?
It typically lowers prices for consumers and increases the quantity sold.
p.23
Subsidy Benefit Distribution
What is the formula for consumers' subsidy benefit per unit?
Eqm price before subsidy - Eqm price after subsidy.
p.8
Minimum Price Control (Price Floor)
What is the government's total expenditure when purchasing excess supply at a price floor of $110?
Total expenditure is calculated based on the surplus quantity at that price.
p.4
Non-Price Methods of Allocation
What is the result of an effective price ceiling?
It results in a shortage (excess demand).
p.6
Minimum Price Control (Price Floor)
What is a price floor?
A minimum price set by the government that buyers must pay for a good.
p.21
Subsidy Benefit Distribution
What happens if demand is perfectly inelastic?
The whole subsidy benefit will be captured by the consumers.
p.16
Per-Unit Tax on Goods and Services
How do you determine the new equilibrium price and quantity after a sales tax?
By adjusting the supply and demand schedules to reflect the tax impact.
p.7
Differences Between Scarcity and Shortage
What does a market price above equilibrium indicate?
It indicates problems of unsold stocks and unemployment.
p.6
Minimum Price Control (Price Floor)
What happens to the market price when a price floor is imposed?
The market price rises to the level of the price floor.
p.9
Quantity Intervention: Quota
What does the supply curve become when the quota limit is reached?
The supply curve becomes vertical at the quota limit.
p.22
Maximum Price Control (Price Ceiling)
What is a potential outcome of a price ceiling besides shortage?
Emergence of a black market.
p.20
Per-Unit Subsidy on Goods and Services
What is the formula for total revenue including subsidy?
Total revenue including subsidy = Consumers' expenditure + Total subsidy received from government.
p.6
Minimum Price Control (Price Floor)
What illegal practice might sellers engage in due to a price floor?
Offering customers illegal price cutting, such as accepting wages below the minimum wage.
p.18
Per-Unit Subsidy on Goods and Services
What is a per-unit subsidy?
A financial aid provided by the government to producers or consumers on a per-unit basis to encourage production or consumption.
p.14
Per-Unit Tax on Goods and Services
What is the formula for calculating government tax revenue after a sales tax is imposed?
Government tax revenue = tax per unit x quantity sold.
p.14
Per-Unit Tax on Goods and Services
How is total revenue net of tax calculated?
Total revenue net of tax = gross revenue - government tax revenue.
p.1
Quantity Intervention: Quota
What is a quota in the context of quantity intervention?
A limit on the amount of a good that can be produced or sold.
p.18
Per-Unit Subsidy on Goods and Services
How does the demand and supply schedule change after the subsidy?
The quantity supplied increases at each price level.
p.1
Subsidy Benefit Distribution
How is the subsidy distributed?
The subsidy benefits producers, but can also lower prices for consumers.
p.11
Quantity Intervention: Quota
What is the quantity transacted when the government sets a quota at 80 units for good Y?
Quantity transacted = 80 units.
p.2
Maximum Price Control (Price Ceiling)
Why does the government set an upper limit for rent?
To make housing more affordable for low-income individuals.
p.8
Differences Between Scarcity and Shortage
How is scarcity defined in economics?
Scarcity occurs when quantity demanded is larger than quantity supplied at zero price.
p.24
Tax Burden Distribution
How is the tax burden shared between consumers and producers?
It can be determined both numerically and graphically.
p.24
Subsidy Benefit Distribution
How is the subsidy benefit shared between consumers and producers?
It can be determined both numerically and graphically.
p.20
Per-Unit Subsidy on Goods and Services
How does the market price change with the provision of a subsidy?
The market price decreases.
p.9
Quantity Intervention: Quota
What is the new equilibrium price after the quota limit is set at 120 units?
The equilibrium price increases to P1.
p.15
Tax Burden Distribution
What is the outcome when the elasticity of demand (E_d) equals the elasticity of supply (E_s)?
Consumers' tax burden equals producers' tax burden.
p.15
Tax Burden Distribution
In which case will the entire tax burden be borne by producers?
If demand is perfectly elastic or supply is perfectly inelastic.
p.10
Quantity Intervention: Quota
What happens to the relative price of high-priced vehicles after a quota is imposed?
The relative price increases.
p.4
Non-Price Methods of Allocation
What is an example of a good sold at a higher price in a black market?
Concert tickets sold by touts at several times the official price.
p.16
Tax Burden Distribution
What is the consumers' tax burden after the sales tax on good Y?
It is the additional amount consumers pay due to the tax.
p.18
Per-Unit Subsidy on Goods and Services
What is an example of a production subsidy?
Subsidies on education to schools.
p.14
Per-Unit Tax on Goods and Services
What is the net price received by sellers after a sales tax is imposed?
Net price = market price - tax.
p.3
Maximum Price Control (Price Ceiling)
What should be checked before analyzing the effects of a price ceiling?
Whether the price ceiling set is effective or not.
p.23
Tax Burden Distribution
What is the formula for consumers' tax burden per unit?
Eqm price after sales tax - Eqm price before sales tax.
p.11
Quantity Intervention: Quota
What is the new total sales revenue when the quota quantity increases to Q3?
New total sales revenue = Area under the demand curve up to Q3.
p.24
Quantity Intervention: Quota
What is the impact of quantity control (quota) on a good?
It affects the price, quantity, and total revenue of the good.
p.5
Differences Between Scarcity and Shortage
What does the presence of congestion and shortage indicate about market prices?
It indicates that the market price is below equilibrium.
p.4
Non-Price Methods of Allocation
What are non-price methods of allocation needed for?
To allocate the limited quantity of a good or service when price cannot increase.
p.5
Differences Between Scarcity and Shortage
What is the relationship between quantity demanded and quantity supplied at P1 during peak hours?
Quantity demanded is larger than quantity supplied, leading to excess demand.
p.15
Tax Burden Distribution
What happens if the elasticity of demand (E_d) is less than the elasticity of supply (E_s)?
Consumers' tax burden is greater than producers' tax burden.
p.6
Minimum Price Control (Price Floor)
What is an example of a price floor in Hong Kong?
The minimum wage for foreign domestic helpers.
p.9
Quantity Intervention: Quota
What happens to the quantity transacted after the quota is imposed?
The quantity transacted drops to Q1 units.
p.12
Effects of Price Controls on Market Dynamics
How does a per-unit tax affect the supply curve?
It shifts the supply curve upwards by the amount of the per-unit tax.
p.6
Minimum Price Control (Price Floor)
How does a price floor affect total revenue when demand is inelastic?
Total revenue rises because the percentage increase in price is greater than the percentage decrease in quantity.
p.12
Per-Unit Tax on Goods and Services
What does the vertical distance between the old and new supply curves represent?
The amount of the per-unit tax.
p.12
Effects of Price Controls on Market Dynamics
What is the equilibrium market price and quantity before the tax is imposed?
Equilibrium market price is $7 and quantity transacted is 4000 units.
p.1
Effects of Price Controls on Market Dynamics
What are the effects of Maximum Price Control on price, quantity, and total revenue?
It typically leads to lower prices, reduced quantity supplied, and can decrease total revenue.
p.1
Minimum Price Control (Price Floor)
What is the meaning of Minimum Price Control (Price Floor)?
A regulation that sets a minimum price that must be paid for a good or service.
p.18
Per-Unit Subsidy on Goods and Services
What was the equilibrium market price before the subsidy?
The equilibrium market price was $10.
p.1
Effects of Price Controls on Market Dynamics
What are the effects of a per-unit tax on price and quantity?
It generally raises the price for consumers and reduces the quantity sold.
p.23
Per-Unit Subsidy on Goods and Services
What happens to the supply curve when a unit subsidy is applied?
The supply curve shifts downwards by the amount of the per-unit subsidy.
p.11
Quantity Intervention: Quota
What is the quantity transacted when the government sets a quota at 70 units for good Y?
Quantity transacted = 70 units.
p.23
Effects of Price Controls on Market Dynamics
What occurs when a price ceiling is implemented?
Total revenue decreases and a shortage occurs.
p.5
Differences Between Scarcity and Shortage
What causes overcrowding in MTR trains during peak hours?
Existing fares are below the equilibrium fares, leading to excess demand.
p.5
Tax Burden Distribution
What happens to total revenue from MTR services during peak hours with a peak-hour surcharge?
Total revenue increases as the price rises from P1 to P2 while quantity remains unchanged.
p.7
Minimum Price Control (Price Floor)
What happens to excess supply of labor when demand for labor increases?
The size of the excess supply decreases, leading to less unemployment.
p.24
Tax Burden Distribution
What is the relationship between elasticity of demand-supply and tax burden/subsidy benefit distribution?
Elasticity affects how the burden or benefit is distributed.
p.21
Subsidy Benefit Distribution
What occurs if supply is perfectly elastic?
The whole subsidy benefit will be captured by the consumers.
p.7
Differences Between Scarcity and Shortage
Can unemployment be interpreted as a 'shortage of jobs'?
Yes, unemployment can be seen as a shortage of available jobs relative to the number of workers wanting to work.
p.6
Minimum Price Control (Price Floor)
What occurs when the price floor is set above the equilibrium price?
A surplus (excess supply) occurs, with quantity supplied exceeding quantity demanded.
p.20
Per-Unit Subsidy on Goods and Services
What must happen to total revenue including subsidy after the provision of the subsidy?
Total revenue including the subsidy must increase.
p.14
Effects of Price Controls on Market Dynamics
When does gross revenue increase after a sales tax is imposed?
When demand is inelastic (% increase in price > % decrease in quantity).
p.20
Per-Unit Subsidy on Goods and Services
What was the initial price and quantity before the subsidy in the example provided?
Price = $10 and Quantity = 6,000 units.
p.3
Effects of Price Controls on Market Dynamics
What happens to the market price when a price ceiling is imposed?
The market price falls to the price ceiling level.
p.3
Effects of Price Controls on Market Dynamics
How does a price ceiling affect total revenue for sellers?
Total revenue decreases due to reduced price and quantity transacted.
p.14
Tax Burden Distribution
What is the producers' tax burden after a sales tax is imposed?
Producers' tax burden = (original price - net price) x quantity sold.
p.11
Quantity Intervention: Quota
What is the quantity transacted when the government sets a quota at 2000 units for good X?
Quantity transacted = 2000 units.
p.11
Quantity Intervention: Quota
How does increasing the quota on imports affect the market price?
Increasing the quota typically lowers the market price due to increased supply.
p.5
Minimum Price Control (Price Floor)
What is the effect of imposing a peak-hour surcharge on MTR fares?
It increases the fare from P1 to P2, reducing the quantity demanded from Q1 to Q2.
p.5
Effects of Price Controls on Market Dynamics
How can lowering off-peak fares help reduce peak-hour congestion?
It decreases demand during peak hours as off-peak and peak services are substitutes.
p.21
Subsidy Benefit Distribution
What happens to the subsidy benefit if demand is perfectly elastic?
The whole subsidy benefit will be captured by the producers.
p.21
Subsidy Benefit Distribution
What occurs if supply is perfectly inelastic?
The whole subsidy benefit will be captured by the producers.
p.19
Subsidy Benefit Distribution
How much do producers receive per unit after the subsidy?
$12 ($8 from consumers + $4 from the government).
p.24
Differences Between Scarcity and Shortage
What is the difference between scarcity and shortage?
Scarcity refers to limited resources, while shortage refers to a temporary lack of a good.
p.16
Tax Burden Distribution
What is the producers' tax burden after the sales tax on good X?
It is the amount producers receive below the original price due to the tax.
p.15
Tax Burden Distribution
When will consumers bear the entire tax burden?
If demand is perfectly inelastic or supply is perfectly elastic.
p.4
Non-Price Methods of Allocation
What happens in a black market related to price ceilings?
Producers illegally raise prices above the price ceiling to increase total revenue.
p.10
Effects of Price Controls on Market Dynamics
According to the law of demand, what will people buy more of when high-priced vehicle prices increase?
Relatively more low-priced vehicles.
p.3
Maximum Price Control (Price Ceiling)
What is a price ceiling?
A maximum price imposed by the government that sellers can charge.
p.16
Tax Burden Distribution
What is the producers' tax burden after the sales tax on good Y?
It is the reduced amount producers receive due to the tax.
p.1
Non-Price Methods of Allocation
What are non-price methods of allocation?
Methods used to allocate resources when prices are controlled, such as waiting lists or rationing.
p.14
Tax Burden Distribution
What is the consumers' tax burden after a sales tax is imposed?
Consumers' tax burden = (new price - original price) x quantity sold.
p.23
Per-Unit Tax on Goods and Services
What happens to the supply curve when a unit tax is imposed?
The supply curve shifts upwards by the amount of the per-unit tax.
p.1
Per-Unit Subsidy on Goods and Services
What is a per-unit subsidy on goods and services?
A payment made by the government to producers for each unit of a good or service sold.
p.23
Subsidy Benefit Distribution
What happens to total revenue when a unit subsidy is applied?
Total revenue including the subsidy increases.
p.2
Maximum Price Control (Price Ceiling)
Is the market rent for residential housing units likely higher or lower than $20 per foot?
It is likely higher than $20 per foot.
p.21
Subsidy Benefit Distribution
What occurs when Ed > Es?
Producers' subsidy benefit is greater than consumers' subsidy benefit.
p.9
Quantity Intervention: Quota
What is a quota in economics?
A quota is the maximum quantity supplied of a good that the government allows.
p.2
Effects of Price Controls on Market Dynamics
What is the impact of rent control on landlords' incentives to renovate?
Landlords would have a lower incentive to renovate their living units for rent.
p.4
Non-Price Methods of Allocation
What is an example of a non-price method of allocation that involves queuing?
First-come, first-served, such as long queues outside public clinics.
p.8
Differences Between Scarcity and Shortage
Can scarcity exist even when the market is at equilibrium?
Yes, scarcity can still exist even at equilibrium.
p.10
Quantity Intervention: Quota
What is the value of a quota in the market?
The quota itself is valuable as producers must obtain it to supply goods.
p.20
Per-Unit Subsidy on Goods and Services
What determines whether total consumers' expenditure increases or decreases after a subsidy?
The price elasticity of demand.
p.4
Non-Price Methods of Allocation
What is a method of allocation that involves random selection?
By drawing lots, such as for residential flats under the Home Ownership Scheme.
p.4
Non-Price Methods of Allocation
How do restaurants use seller's preference in allocation?
By reserving tables for regular customers during peak hours.
p.12
Effects of Price Controls on Market Dynamics
What happens to the equilibrium market price when a $3 per-unit tax is imposed?
The equilibrium market price increases to $9.
p.12
Effects of Price Controls on Market Dynamics
What is the effect of a per-unit tax on the quantity transacted?
The quantity transacted drops to 3600 units.
p.6
Minimum Price Control (Price Floor)
What type of competition may arise due to a price floor?
Non-price competition, such as workers improving their skills to stay employed.
p.6
Minimum Price Control (Price Floor)
What does it mean when price and quantity change in opposite directions?
The change in total revenue depends on the price elasticity of demand.
p.22
Quantity Intervention: Quota
What is the effect of an effective quota on price and quantity?
Price increases and quantity decreases to the quota limit.
p.13
Tax Burden Distribution
How is the total tax burden calculated?
Total tax burden = per-unit tax times quantity transacted.
p.24
Per-Unit Tax on Goods and Services
How do unit tax and unit subsidy affect a good?
They influence the price, quantity, and total revenue of the good.
p.8
Differences Between Scarcity and Shortage
What is the difference between scarcity and shortage?
Scarcity exists at zero price, while shortage occurs when quantity demanded exceeds quantity supplied at a price below equilibrium.
p.8
Differences Between Scarcity and Shortage
What causes a shortage in the market?
A shortage occurs when the price is fixed below equilibrium, leading to excess demand.
p.4
Non-Price Methods of Allocation
How are hospital beds allocated in public hospitals?
According to the seriousness of patients' diseases.
p.22
Maximum Price Control (Price Ceiling)
What occurs as a result of an effective price ceiling?
Shortage (excess demand).
p.14
Per-Unit Tax on Goods and Services
What happens to the supply of a good when a sales tax is imposed?
The supply of the good decreases.
p.9
Quantity Intervention: Quota
What happens to the quantity supplied if it exceeds the quota limit?
The quantity supplied would be changed to the quota limit.
p.3
Effects of Price Controls on Market Dynamics
What occurs when a price ceiling is set below the equilibrium price?
A shortage of the good occurs.
p.3
Maximum Price Control (Price Ceiling)
What happens to market conditions if a price ceiling is set above the equilibrium price?
Market price, quantity, and total revenue remain unchanged.
p.1
Per-Unit Tax on Goods and Services
What is a per-unit tax on goods and services?
A tax imposed on each unit of a good or service sold.
p.11
Quantity Intervention: Quota
What is the quantity transacted when the government sets a quota at 1600 units for good X?
Quantity transacted = 1600 units.
p.23
Subsidy Benefit Distribution
What is the relationship between price elasticity of demand and total expenditure when a subsidy is applied?
Inelastic demand leads to a decrease in total expenditure, while elastic demand leads to an increase.
p.11
Quantity Intervention: Quota
What is the total sales revenue when the quota quantity is Q1?
Total sales revenue = Area under the demand curve up to Q1.
p.17
Elasticity Comparison
How does the elasticity of demand compare to the elasticity of supply based on the tax burdens?
Demand is more elastic than supply.
p.7
Minimum Price Control (Price Floor)
What is derived demand in the context of labor?
Demand for labor is derived from the demand for goods and services.
p.4
Non-Price Methods of Allocation
How are places in universities allocated?
According to academic results.
p.12
Per-Unit Tax on Goods and Services
What is a per-unit sales tax?
The same amount of tax is imposed on each unit of the good.
p.16
Tax Burden Distribution
What is the consumers' tax burden after the sales tax on good X?
It is the amount consumers pay above the original price due to the tax.
p.10
Effects of Price Controls on Market Dynamics
What is the relationship between price increase and quantity change in inelastic demand?
Percentage increase in price is greater than percentage decrease in quantity.
p.16
Tax Burden Distribution
How does the elasticity of demand compare to the elasticity of supply in the context of a sales tax?
The comparison indicates how the tax burden is shared between consumers and producers.
p.16
Per-Unit Tax on Goods and Services
What is the effect of a $5 per unit sales tax on good Y?
It changes the equilibrium price and quantity.
p.1
Maximum Price Control (Price Ceiling)
What is the meaning of Maximum Price Control (Price Ceiling)?
A regulation that sets a maximum price that can be charged for a good or service.
p.16
Tax Burden Distribution
How does the elasticity of demand compare to the elasticity of supply for good Y?
The comparison shows how the tax burden is distributed between consumers and producers.
p.18
Per-Unit Subsidy on Goods and Services
What happens to the equilibrium price and quantity when a $4 per-unit subsidy is provided?
The equilibrium price decreases to $8 and the quantity transacted increases to 6400 units.
p.3
Maximum Price Control (Price Ceiling)
What is the effect of a price ceiling set at $120 in the given example?
Market price decreases from $160 to $120, quantity transacted decreases from 400 units to 300 units, and total revenue reduces from $64,000 to $36,000.
p.1
Tax Burden Distribution
How is the tax burden distributed?
The tax burden is shared between consumers and producers, depending on the elasticity of demand and supply.
p.23
Effects of Price Controls on Market Dynamics
What is the effect of a price floor on total revenue?
Total revenue may change in uncertain ways.
p.20
Per-Unit Subsidy on Goods and Services
When does total consumers' expenditure increase?
When demand is elastic (% decrease in price < % increase in quantity).
p.20
Per-Unit Subsidy on Goods and Services
When does total consumers' expenditure decrease?
When demand is inelastic (% decrease in price > % increase in quantity).
p.14
Effects of Price Controls on Market Dynamics
What determines whether gross revenue increases or decreases after a sales tax is imposed?
It depends on the price elasticity of demand.
p.16
Per-Unit Tax on Goods and Services
How do you find the new equilibrium price and quantity after a sales tax on good Y?
By adjusting the supply and demand schedules to account for the tax.
p.14
Effects of Price Controls on Market Dynamics
When does gross revenue decrease after a sales tax is imposed?
When demand is elastic (% increase in price < % decrease in quantity).
p.22
Quantity Intervention: Quota
What happens to the supply curve when an effective quota is imposed?
The supply curve becomes vertical at the quota limit.
p.1
Effects of Price Controls on Market Dynamics
What are the effects of Minimum Price Control on price, quantity, and total revenue?
It usually results in higher prices, increased quantity supplied, and can lead to surplus.
p.1
Effects of Price Controls on Market Dynamics
What are the effects of a quota on price, quantity, and total revenue?
It can lead to higher prices, reduced quantity available in the market, and can affect total revenue depending on demand.
p.23
Tax Burden Distribution
What determines whether gross revenue increases or decreases after a sales tax?
It depends on the price elasticity of demand.
p.11
Quantity Intervention: Quota
What happens to the market price in Country A when the quota quantity increases from Q1 to Q3?
New market price = lower than the original price.
p.22
Quantity Intervention: Quota
What happens to the average quality of goods when a quota is imposed?
Average quality increases as people buy relatively more high-quality goods.
p.23
Tax Burden Distribution
What happens to total revenue when a unit tax is imposed?
Total revenue net of tax decreases.
