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Chapter 6-9

ECO105Y1 Chapter Notes - Chapter 6-9: Product Differentiation, Fixed Cost, Creative Destruction

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Avi Cohen

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ECO105 Key Terms Review
Term Test 2 (Chap. 6-9)
Chapter 6. Government Policy Choices
Price ceiling maximum price set by government, making it illegal to charge higher
Rent Control - Government set a maximum rent that limits how high rents can be
raised, while allowing rents to be flexible
Price floor – minimum price set by government, making it illegal to pay a lower price
! Minimum wage laws: example of price floor, government set a minimum
amount of wage that the employer must pay to its workers
Equal outcomes - everyone ends up with the same result; in the end everyone get the
same amount
! e.g. earning the same income, access to the same level of health-care
Equal opportunities – at the start everyone has the same opportunities, but outcomes
can be different;
! no one has any unfair advantages, ends up with a different outcomes based
on choices, efforts and luck (equity in the form of equal opportunity)
Chapter 7. Finding the Bottom Line
Depreciation – the decrease in value of equipment over time because of wear and
tear and because it becomes obsolete
! Business must spread the cost out over the lifetime of long-lasting
equipment (e.g. equipment that worth $20 000 divided by four years)
Obvious costs (explicit costs) – costs a business pays directly
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