What are the two kinds of price controls used in the United States, and how are they different? Show on the graph when they are binding and not.

ational and local governments sometimes implement price controls, which are legal minimum or maximum prices for specific goods or services, in an attempt to manage the economy by direct intervention. There are two types of price controls: price ceilings and price floors. A price ceiling is the legal maximum price for a good or service, while a price floor is the legal minimum price. Although both a price ceiling and a price floor can be imposed, the government usually only selects either a ceiling or a floor for particular goods or services.

2. Explain, please, the Rent control in detail. What do economists think of rent control as a mechanism for achieving the goal? Also, do not forget to mention about the consequnces of it. (positive & negative).

Rent control in the United States refers to laws or ordinances that set price controls on the renting of American residential housing. It functions as a price ceiling,
The goal of rent control is to help the poor by making housing more affordable. Economists often criticize rent control as a highly inefficient way of helping the poor raise their standard of living.
The buyers of the good or service subject to a price ceiling benefit from the ceiling, if they are still able to purchase the product. Sellers of a good or service subject to a price ceiling are hurt by the ceiling, as are the workers who produce the product, and those buyers unable to purchase the product because of the shortage caused by the price ceiling. In the long run, even successful buyers of the product may be hurt by the price ceiling because of deterioration in the quality of the product, as often occurs under rent control.

 

How do the effects of rent control differ in the short run and the long run? (Case study: explain in detail)

In the short run, the primary effect of rent control is to reduce rents. Shortages created are small. In the long run, rent control creates greater housing shortages, reduces the supply of housing, and also reduces the quality of housing.

 

What is the origin and purpose of the minimum wage law in the United States? Explain The Minimum Wage in detail. (Case study as well :)

 

Those helped by the minimum wage are the workers who are still employed, but now receive the higher wage. In the diagram, those would be measured by the quantity of labor demanded at the minimum wage. Those who are hurt by the minimum wage are those who are now unemployed. These workers are measured as the difference between the quantity of labor supplied and the quantity demanded at the minimum wage.

 

5. Discuss the reasons of Long Lines at the Gas Pump in the USA. Prove on graphs who are really responsible ones for that kind of situation happened in USA. (OPEC or Government regulations)? (Case study: explain in detail)

----------

Why didn’t the 1990 luxury tax which Congress placed on buyers of yachts, private airplanes, furs, jewelry, expensive cars, and similar items succeed in raising revenue primarily from the rich? (Case study: explain in detail). Demonstrate your answer on the graph.

Even though the items affected by the luxury tax are, indeed, bought primarily by the wealthiest taxpayers, the price elasticity of demand for luxury goods is high relative to the price elasticity of supply. Hence, when the tax was imposed on those goods, there was a significant reduction in quantity demanded and only a slight increase in equilibrium market price. The burden of the tax fell mostly on the suppliers, who suffered a substantial reduction in the price they received, and a substantial reduction in the quantity sold and in total revenue.

­­­­­

 

 

Chapter 7

1. Explain in detail what consumer surplus is, taking into account relationship between the demand curve and the willingness to pay and show how it is measured?

Consumer surplus measures the benefit to buyers of participating in a market. It is measured as the amount a buyer is willing to pay for a good minus the amount a buyer actually pays for it. For an individual purchase, consumer surplus is the difference between the willingness to pay, as shown on the demand curve, and the market price. For the market, total consumer surplus is the area under the demand curve and above the price, from the origin to the quantity purchased.

2. Megan loves donuts. The table shown reflects the value Megan places on each donut she eats:

ANSWER: a.
b. At a price of $.20, Megan would buy 5 donuts.

3. Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

-----------

4. -------------

⇐ Предыдущая1234

Поделиться: