Everything Since Last Exam

Everything since last exam 33 questions check for example quiz can use calculator 1st question about cross-price elasticity Epba  will not calculate  put into equation Will tell you whether they are sub or compliments If pos they re subs If neg they are compliments #3,4,5 will be about price controls know 2 types of price control price ceiling price floor know whether they are binding or not binding if they are not binding, we are done if they are binding, we either have surplus or shortage… impact classic example: floor = minimum wage ceiling = rent control when are they binding what will be the consequence ** know story about minimum wage**** when is it binding who benefits from it – how many who will be hurt from it – how many people go to lab sheets and find one about minimum wage and understand it #next few questions are about taxes know: when a tax is imposed in a given market – it does not matter where the tax will create wedge between paid and receive – price paid will be higher tax will shrink market – equil will be lower buyers and seelers share burden burden of tax will fall more heavily on the least elastic less elastic you are the more you will pay tax creates dead weight loss will be asked to calculate whole rectangle for amount of tax – length pb-ps what is dead weight loss—triangle on inside

He will make it with easy numbers Burden of taxation – tax will fall more heavily on least elastic side of mkt WELFARE ECONOMY – WILL BE DOMINATE PART OF EXAM!!!!!!!!!!!!!! Go back to get lab sheets Example of Alicia of bottle water Willingness to pay Cost of production Csurplus – area above price below demand curve Psurplus – above supply but below price – ½ b *h Tsurplus – consumer + producer; or whole traiangle, when Qo is produced – value to buyers – cost to sellers Definition in words And be able to calculate Look at all lab sheets Go back and identify with area – Many many questions Must master this section Use this to revisit taxation!!! Question might be about taxes and welfare CASE OF TAXATION Have to know story – economy working freely then govt puts tax on mkt – then say how will tax affect peoples well-being… compare surpluses before and after tax… which creates a dead-weight lost (little traiangle) Equity/efficency – know difference Greatest ts = efficency bigger tax = bigger elasticity

Remember the laffer curve What determines dwl – elasticity Tax revenue vs tax size Calculate and identify and why there is a dwl lost

And determine size Calculation between tax collection and tax INTERNATIONAL TRADE!!! Know story of international trade When we open economy we face world price which may be higher or lower than domestic price If higher, we ceome export – consumers are worse off producers are btter, society is better off If lower – we are import consumers are better off, producers are worse off, society is better off Draw this graphically pw

c

a b

d pw #2

know args for national trade unfair competition protection as there are 5 10 questions all together 2 ways tariff set quota

- limit on qtys you can import

have to have in mind pic of tariff sss

What is qty imported when imported What is qty imported What is tax collection when tariffWhat is dwl created by tariff – two little triangles on either side of tax collection What is cs before tariff What is cs after tariff Etc more like this!!!! Know whole story!!!!!!!!!!!!!!! Might be cases where some govt is needed Externality EXTERNALITY Really need to know this story – whole story Uncompensated effort of someones actions on the wellbeing of a bystander Pos or neg Noises pollution – neg Education taxation – pos When there is an externality mkt fails to allocate resources efficency, the mkt fails! What can you do 1. nothing- let people talk it out… boom box. When where there be a deal? When will there not be a deal? Coase theory If choose to do 2. require good behavior, prohibit bad behavior 3. put tax on neg externality, subsidize pos externality tell in words and work out in picture another mrkt failure is PUBLIC GOODS AND COMMON GOODS can classify a group if good is exclusible or rival in consumption yes

yes private

no

common resources

no natural mono public good