2nd econ exam

12 terms by tremaynerichardson 

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demand for the product is more elastic than the supply of the product

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

total surplus

can be used to measure a market's efficiency

total surplus

is the to value to buyers minus the cost to sellers.

total surplus

is the sum of consumer and producer surplus.

total surplus is maximized

We can say that the allocation of resources is efficient if

willingness to pay

measures the value that a buyer places on a good.

deadweight loss.

The decrease in total surplus that results from a market distortion, such as a tax, is called a

ceiling

A legal maximum on the price at which a good can be sold is called a price

above the equilibrium price, causing a surplus

A price floor is binding when it is set

regardless of how the tax is levied

When a tax is levied on a good, the buyers and sellers of the good share the burden,

tax incidence

the distribution of the tax burden between buyers and sellers

the tax wedge between producers & consumers prevents beneficial transactions from occurring

Why do taxes cause dead weight loss?

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