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50 Cards in this Set
- Front
- Back
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Price ceiling |
You may not sell any more than the price limit |
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Price floor |
Price may not fall below the world price |
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Surplus |
Far more goods on the market than gets consumed |
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Inefficient allocation of sales |
Under P* all the firms with an opportunity cost less than P* will produce but with a binding Pf any firm with an opportunity cost less will produce. Even if these forms are inefficient high cost firms |
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Wasted resources |
Surplus goes somewhere but not somewhere good |
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Inefficiently high quality |
If firms can't compete on basis of price they are forced to compete on basis of quality. |
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Illegal activity |
Finding ways around the price floor |
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Deadweight loss |
Value of lost mutually beneficial transactions |
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Quantity control |
Limiting of the number of licenses or permits. Quantity is constrained. |
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Demand price |
Price that will induce consumers to consume |
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Supply price |
Price that will induce produces to supply. |
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Tax revenue |
Is needed to finance the government. |
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Excise taxes |
a tax that is charged on each unit of a good |
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Tax incidence |
A tax is a measure of who really pays the tax |
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Inelastic demand |
Mostly paid by consumers |
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Greater elasticity |
Better able to change their behavior. |
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Fungible behavior |
You can avoid the tax |
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Inelasticity |
Generally not willing or able to change their behavior |
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Tax base |
Number of units of output that a tax is collected on |
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Lump sum taxes |
Don't create DWL. Everyone pays the same regardless |
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Proportional tax |
Everyone pays the same amount to their income. IE 2% |
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Progressive tax |
More income. Higher tax rate. |
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Regressive tax |
Less income. Higher tax rate |
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Progressive tax examples |
Income tax. Capital gains tax. Luxury tax. |
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Regressive tax examples |
Sales tax. Some excise taxes such as malt liquor. |
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Laffer curve |
When someone is taxed too high you lose tax. |
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Equity 2 concepts |
The benefits principal. Ability to pay principal |
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The benefits principal |
Those that benefit should pay for those expenditures |
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Ability to pay principal |
Those that can afford to pay more should |
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Imports |
Goods and services purchased from producers in other countries |
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Exports |
Goods and services produced here but purchased by consumers in other countries |
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International trade |
Comprises of imports and exports |
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Globalization |
The general increase in the sum of all imports and exports |
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Comparative advanatge |
country can produce a good or service with a lower opportunity cost than other countries. |
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Ricardian model |
If each country produces what they have a comparative advantage on both countries will have more to consume. |
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Relative price |
The rate that one good trades for another |
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Absolute advantage |
Anytime a country can produce more of a good or service than another country |
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Sources of comparative advantage |
Differences in climate and geography Differences in factor endowments Differences in technology |
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Factor intensity |
is a measure of which factor is used in relatively greater proportion than other factors. Ie America and skilled labor |
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Tariffs |
"Excise tax" every unit you export or import you have to pay a tax |
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Quotas |
Restricted number of goods that can be imported or exported |
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Trade protection |
Policies intended to reduce trade flows |
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Import competing industries |
Most trade protections are the result of lobbying from this. These firms don't want to compete with foreign competitors. |
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Rent seeking |
Preferential treatment that is good for the agent but bad for society economists |
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How does reality match trade theory differ |
Increasing opportunity costs Transportation costs Gains from variety |
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Increasing opportunity costs |
Incomplete specialization countries will still produce some |
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Transportation cost |
Trade is modeled as costless but not in reality |
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Gains from variety |
Not motivated by comparative advantage but stuff is a little bit different made in other places. |
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Distortionary |
When a market intervention alters the free market outcome |
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Hecksher -ohlin model |
Explains trade and factor endowments/intensity |
