ECON-221 Lecture Notes - Lecture 21: Economic Surplus, Demand Curve

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coppermule660

11 Sep 2020

School

Diablo Valley College

Department

Economics

Course

ECON-221

Professor

yoon

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Document Summary

In the supply and demand framework for goods and services: consumers (all of you) are the demanders of goods, firms ( the businesses) are the suppliers (producers) of the goods. Demand curve is downward sloping: low wages with less labor, high wages with less labor. Politically: raising a non-binding wage floor will seem caring and benevolent. Economically: raising a non-binding wage floor will have no effect as long as the new floor is still below the equibriumm. What will be the effect of a non-binding price. In the event of a binding price ceiling what is one function that a. Reduces the shortage caused by the price ceiling. Minimum wage is a price ceiling, firms supply labor, firms. Supply and demand generally become more slastic in the long run. This means that shortages caused by price ceilings __ become. The study of how the allocation of resources affects economic well-being. Economics welfare is composed of two measures of market vale.

Related Questions

QUESTION 38

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

	a.	The binding price ceiling will cause firms to minimize their spending on the research and development of alternatives to gasoline.
	b.	The binding price ceiling will discourage individuals from using their personal automobile to commute to work or school.
	c.	The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.
	d.	The binding price ceiling will encourage oil companies to deplete the resource too quickly.
	e.	The binding price ceiling will cause firms to produce only gasoline of the highest quality.

1.05000 points

QUESTION 39

If a firm's long-run average total costs increase as it increases its scale of production, the firm is experiencing:

	a.	increasing returns from specialization.
	b.	diseconomies of scale.
	c.	economies of scale.
	d.	constant returns to scale.
	e.	diminishing marginal product.

1.05000 points

QUESTION 40

A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ tax revenue from that tax.

	a.	increase; increase
	b.	increase; have no effect on
	c.	decrease; have no effect on
	d.	decrease; decrease
	e.	increase; decrease

1.05000 points

QUESTION 41

The costs of a market activity paid for by an individual engaged in the market activity are:

	a.	external costs.
	b.	social costs.
	c.	common costs.
	d.	free-rider costs.
	e.	internal costs.

1.05000 points

QUESTION 42

Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?

	a.	Equilibrium price will go down and equilibrium quantity will be indeterminate.
	b.	Equilibrium price will go up and equilibrium quantity will go down.
	c.	Equilibrium price will go up and equilibrium quantity will be indeterminate.
	d.	Equilibrium price will go down and equilibrium quantity will go up.
	e.	Equilibrium price will go up and equilibrium quantity will go up.

1.05000 points

QUESTION 43

The minimum wage law is an example of a:

	a.	price floor.
	b.	law that sets the minimum number of hours that an employee must work for wages during the week.
	c.	law that allows individual employers and employees to make free decisions.
	d.	law that requires quantity demanded to equal quantity supplied.
	e.	price ceiling.

taupezebra466

1. How does a price system assess differences in scarcity among economic goods and services?

2. Explain what happens to the supply of wheat when

a. Consumer incomes increase.

b. Labor in the farming industry becomes unionized.

c. There is a technological advance in planting technology.

d. Futures markets predict an increase in corn prices.

e. A new immigration bill passes and it will increase the population.

3. Is it more efficient when the market clears or when the government imposes an effective price floor?

4. What happens to market rationing and resource allocation after the government imposes an effective price ceiling?

5. Can politicians help their constituents by manipulating prices?

6. Will increases in the minimum wage slow down labor market hiring during a recession?

amberhippopotamus97

Since 2009, the national minimum wage has been $7.25 per hour for most occupations in the private sector. Over the past several years, support for an increase in the minimum wage has come from a wide variety of sources, including President Obama administration. Many of those who support an increase in the minimum wage believe this is one way the government should exercise its social responsibility in an attempt to reduce poverty. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.

1) Minimum wage is a price floor, so discuss an increase in the minimum wage from a supply and demand standpoint, making sure to address the concept of surplus with respect to the quantity of labor supplied and the quantity of labor demanded that is generated by this price floor.

2) What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing?

3) Discuss any potential changes in the incentives for low-skilled workers to increase their human capital, and for employers to substitute capital inputs (technology and automation) for labor.

4) What might be the impact on government spending on entitlements such as welfare, food stamps, and unemployment compensation in light of the fact that changes in the minimum wage can create changes in unemployment and underemployment?

Based on your responses, do you believe that the minimum wage should be raised, lowered, remain as it currently is, or be altogether eliminated? Explain your answer, and make sure to address any social responsibility the government should have regarding the well-being of its citizens with respect to the setting of wages in the private sector

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ECON-221 Lecture Notes - Lecture 21: Economic Surplus, Demand Curve

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