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21 Cards in this Set
- Front
- Back
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Euro
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The currency used by the 16 members of the European Union.
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exchange rate
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The price of one country's currency in terms of another currency.
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excise tax
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A tax that is levied on a specific good.
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minimum wage law
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A law specifying the lowest wage a firm can legally pay an employee.
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price ceiling
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A government-imposed limit on how high a price can be charged. In other words, a government-set price below the market equilibrium price.
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price floor
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A government-imposed limit on how low a price can be charged. In other words, a government-set price above equilibrium price.
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rent control
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A price ceiling on rents, set by government.
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tariff
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An excise tax on an imported (internationally traded) good.
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third-party-payer market
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A market in which the person who receives the good differs from the person paying for it.
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Say that the equilibrium price and quantity both rose. What would you say was the most likely cause?
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The Demand curve shifted right
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Say that equilibrium price fell and quantity remained constant. What would you say was the most likely cause?
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The supply curve shifted right and the demand curve shifted left.
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Demonstrate the effect on price and quantity of each of the following events:
In a recent popularity test, Elmo topped Cookie Monster in popularity (this represents a trend in children's tastes). Market: cookies. The Atkins Diet that limits carbohydrates was reported to be very effective. Market: bread |
The demand for cookies will decrease
The demand for bread will decreasing moving the demand curve to the left. |
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In 2004, oil facilities in Iraq were attacked and strong economies in the United States and China boosted the demand for oil.
Demonstrate graphically how these events led to increases in oil prices in June 2004. What was the effect on the equilibrium quantity of oil bought and sold? |
Equilibrium price of oil rose and equilibrium quantity of oil remained the same.
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As a result of political pressure, OPEC agreed to increase the daily quota by 2 million barrels a day. What was the likely effect on equilibrium oil price and quantity? Demonstrate your answer graphically.
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Equilibrium price of oil declined and equilibrium quantity rose.
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Kennesaw University Professor Frank A. Adams III and Auburn University Professors A. H. Barnett and David L. Kaserman recently estimated the effect of legalizing the sale of cadaverous organs, which currently are in shortage at zero price. What are the effects of the following two possibilities on the equilibrium price and quantity of transplanted organs if their sale were to be legalized? Demonstrate your answers graphically.
Many of those currently willing to donate the organs of a deceased relative at zero price are offended that organs can be bought and sold. People are willing to provide significantly more organs. |
Equilibrium price of transplanted organs rises. Equilibrium quantity of transplanted organs declines.
Equilibrium price of transplanted organs declines. Equilibrium quantity of transplanted organs rises. |
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The dollar price of the South African rand fell from 29 cents to 22 cents in 1996, the same year the country was rocked by political turmoil. Using supply/demand analysis, explain why the turmoil led to a decline in the price of the rand.
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Foreign demand for the rand decreased, shifting the demand curve for the Rand to the left. Domestic demand for foreign currency increased, shifting the supply curve for the rand to the right.
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Demonstrate graphically the effect of an effective price ceiling
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Below the equilibrium.
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Demonstrate graphically why rent controls might increase the total payment that new renters pay for an apartment.
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Up the demand curve.
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Demonstrate graphically the effect of a price floor.
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Above the equilibrium. Price will rise. Quantity bought and sold will decline. The result will be excess supply.
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The United States imposes substantial taxes on cigarettes but not on loose tobacco. When the tax went into effect, what effect did it likely have for cigarette rolling machines? (Difficult)
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The demand for rolling machines will increase.
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In 1996, the television networks were given $70 billion worth of space on public airways for broadcasting highdefinition television rather than auction it off.
Why do airways have value? After the airway had been given to the network, would you expect that the broadcaster would produce high-definition television? |
Airways have value because it is a way for companies to reach their customers and market to them, in order to get them to buy their products.
They would produce high definition television if there was a demand for it. |
