Cfa Level 1 Reading 15 Markets In Action

Front 1

A decrease in the supply of houseing

Back 1

raises rent

Front 2

Higher rents

Back 2

stimulate blding, and in the longrun, the quantity of housing increases and rents fall

Front 3

Rent ceiling that is set below the equilibrium rent

Back 3

creates a housing shortage, wasteful search, and a black market

Front 4

Decrease in hte demand for low-skilled labor

Back 4

lowers wage rate and reduces employment

Front 5

Lower wage rate encourages people with low skills

Back 5

to acquire more skill, which decreases the supply of low-skilled labor and, in the long run, raises the wage rate of low-skilled labor

Front 6

Minimum wage set above the equilibrium wage rate

Back 6

creates unemploymentand incrreases the amount of time people spend searching for a job

Front 7

Minimum wage wage hits low-skilled young people

Back 7

hardest

Front 8

Tax raises price but usually by less

Back 8

than the tax

Front 9

Shares of a tax paid by buyers and by sellers

Back 9

depend on the elasticity of demand and hte elasticity of supply

Front 10

Less elastic the demand or the more elastic the supply

Back 10

the larger is the share of the tax paid by buyers

Front 11

If demand is perfectly elastic or supply is perfectly inelastic

Back 11

sellers pay the entire tax

Front 12

If demand is perfectly inelastic or supply is perfectly elastic

Back 12

buyers pay the entire tax

Front 13

Farm revenues fluctuate

Back 13

because supply fluctuates

Front 14

Because the demand for most farm products is inelastic

Back 14

a decrease in supply increases farm revenue, while an increase in supply decreases farm revenue

Front 15

A subsidy is like a negative tax

Back 15

it lowers the price and leads to inefficient overproduction

Front 16

A quota leads to inefficient underproduction,

Back 16

which raises prices

Front 17

Penalties on sellers of an illegal good increase

Back 17

the cost of sellin the good and decrease it's supply

Front 18

Penalties on buyers of an illegal good

Back 18

decrease their willingness to pay and cecrease the demand for the good

Front 19

The higher the penalties and the more effective the law enforcement

Back 19

the smaller is the qauntity bought

Front 20

A tax that is set at a sufficiently high rate will

Back 20

decrease the quantity of a drug bought, but there will be a tendency for the tax to evaded

Front 21

Short-run supply curve

Back 21

shows the change in the quantity of housing supplied as the rent changes while the nnumber of houses and apartment buildings remain constant

Front 22

Long-run supply curve

Back 22

shows how the quantity of housing supplied respons to a chnage in price after enough time has elapsed for a new apartment buildings and houses to be erected or for existing ones to be destroyed

Front 23

Equilibrium and rent

Back 23

are determined by demand and short-run supply

Front 24

Price ceiling

Back 24

a regulation that makes it illegal to charge a price higher than a specified level

Front 25

Rent ceiling

Back 25

When a price ceiling is applied to a housing market

Front 26

Search Activity

Back 26

the time spent looking for someone with whom to do business

Front 27

Search activity increases

Back 27

when a price is regulated and there is a shortage

Front 28

The opportunity cost of a good is equal not only to its price

Back 28

but also to the value of the search time spent finding the good

Front 29

A rent ceiling controls

Back 29

the rent portion of the cost of housing, bit id does not control the opportunity cost, which might even be higher than the rent would be if the market were unregulated

Front 30

Black Market

Back 30

an illegal market in which the price exceeds the legally imposed price ceiling

Front 31

In an unregulated market, the market determines the rent

Back 31

at which the quantity demanded equals the quantity supplied, in this situation, scarce resources are allocated efficiently, marginal social benefit equals marginal social cost

Front 32

The long-run supply of labor

Back 32

is the relationship between the quantity of labor supplied and the wage rate after enough time has passed for people to enter or leave the low-skilled labor market

Front 33

Market for low skilled labor in the short-run

Back 33

the short-run supply of labor describes how the number of hours of labor supplied by this gien number of people changes as the wage rate changes, to get them to work more house, they must be offered a higher wage rate

Front 34

Market for low skilled labor in the long-run

Back 34

people can acquire new skills and find new types of jobs, the number of people in the labor market depends on the wage rate, if hte wage rate of labor is high, people will enter the market, if the wage rate is low, people will leave the market

Front 35

Price floor

Back 35

a regulation that makes it illegal to trade at a pricde lower than a specified level

Front 36

Minimum Wage

Back 36

when a price floor is applied to labor markets

Front 37

When minimum wage is set below the equlibrium wage

Back 37

the minimum wage has no effect

Front 38

When the minimum wage is set above the equilibrium wage

Back 38

the minimum wage has great impact

Front 39

The minimum wage frustrates

Back 39

the market mechanism and results in unemployment, wasted labor resources, and inefficient amount of job search

Front 40

Living Wage

Back 40

defined as an hourly wage rate that enables a person who works 40-hour work week to rent adequate housing for not more than 30 percent of the amount earned

Front 41

Tax incidence

Back 41

the division of the burden of a tax between the buyer and the seller, does not depend on the tax law

Front 42

Is the tax burden shared equally between seller and buyer?

Back 42

the key point is that when a transaaction is taxed, there are two prices: the price paid by buyers, which includes the tax; annd the price received by sellers, which excludes the tax, buyers respond only to the price that inclues the tax, because that is the price they pay, sellers respond only to the price that excludes the tax, becauuse that is the price they receive.

Front 43

Tax Division and Elasticy of Demand:
Perfectly inelastic demand

Back 43

buyers pay

Front 44

Tax Division and Elasticy of Demand:
Perfectly elastic demand

Back 44

sellers pay

Front 45

Tax Division and Elasticity of Supply:
Perfectly inelastic supply

Back 45

sellers pay

Front 46

Tax Division and Elasticity of Supply:
Perfectly elastic supply

Back 46

buyers pay

Front 47

Subsidies and Quotas:
Harvest Fluctuations

Back 47

ho control over the quantity supplied and supply is inelastic along a momentary supply curve

Front 48

Subsidies and Quotas:
Poor Harvest

Back 48

a decrease in supply brings a rise in price and an increase in farm revenue

Front 49

Subsidies and Quotas:
Bumper Harvest

Back 49

an increase in supply brings a fall in price and a decrease in farm revenue

Front 50

Subsidies and Quotas:
Inelasticity of Demand

Back 50

farm revenue and the quantity produced fluctuate in oppisite directions because the demand for farm goods is inelastic, the percentage change in the quantity demanded is less than the percentage change in price

Front 51

Subsidies and Quotas:
Elasticity of Demand

Back 51

demand is elastic, farm revenue and hte quantity produced fluctuate in the same direction, bumper harvests increase revenue, and poor harvests decrease it, but the demand for most agricultural products is inelastic

Front 52

Two methods of intervention are often used in markets for farm products

Back 52

Subsidies and Production quotas

Front 53

Subsidies

Back 53

a payment made by the government to a producer, because the supply curve is the marginal cost curve, and the demand curve is the marginal benefit curve, a subsidy raises marginal cost above marginal benefit and creates deadweight loss from overproduction

Front 54

Production Quotas

Back 54

an upper limit to the quantity of a good that may be produced in a specified period, inefficient because it results in underproductino, at the quota quantity, marginal benefit is equal to the market price and marginal cost is less than the market price, so marginal benefit exceeds marginal cost