Podcast
Questions and Answers
What is a positive statement?
What is a positive statement?
Can be tested and validated by collecting data.
What is a normative statement?
What is a normative statement?
Assessed in light of values and opinions.
If current production shifts from consumer goods towards more capital, what is the effect?
If current production shifts from consumer goods towards more capital, what is the effect?
Future production possibilities are increased.
What is a capital good?
What is a capital good?
Which country is a good example of a high present rate of investment and a low present rate of consumer goods consumption?
Which country is a good example of a high present rate of investment and a low present rate of consumer goods consumption?
What happens in an imperfect market?
What happens in an imperfect market?
In a market economy, prices adjust so that quantity supplied equals what?
In a market economy, prices adjust so that quantity supplied equals what?
What is market demand?
What is market demand?
What is a long run shortage?
What is a long run shortage?
Why are price floors implemented by the government?
Why are price floors implemented by the government?
Why are price controls necessary?
Why are price controls necessary?
How has the international community sought to reduce the negative effects of price floors?
How has the international community sought to reduce the negative effects of price floors?
If a price ceiling is above equilibrium, it is nonbinding.
If a price ceiling is above equilibrium, it is nonbinding.
If a price ceiling is below equilibrium, it is binding and affects the market.
If a price ceiling is below equilibrium, it is binding and affects the market.
After an increase in minimum wage, unemployment is ______ in the long run than the short run.
After an increase in minimum wage, unemployment is ______ in the long run than the short run.
What are the unintended effects of rent control?
What are the unintended effects of rent control?
Rent control units have a -------- ownership turnover rate.
Rent control units have a -------- ownership turnover rate.
Low income people have an easier time finding somewhere to live in the long term when there's rent control.
Low income people have an easier time finding somewhere to live in the long term when there's rent control.
Why is there a minimum wage when the price ceiling is already non-binding?
Why is there a minimum wage when the price ceiling is already non-binding?
Why is rent control considered an ineffective way to provide housing for low-income people?
Why is rent control considered an ineffective way to provide housing for low-income people?
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Study Notes
Economic Statements
- Positive statement: Can be tested and validated through data collection.
- Normative statement: Judged based on values and opinions.
Production and Capital Goods
- Shifting current production from consumer goods to capital goods enhances future production possibilities.
- Capital good: Provides benefits or returns in the future.
Investment and Consumer Goods
- China: Example of a country with high current investment rates and low current consumption of consumer goods.
Market Dynamics
- In an imperfect market, either buyers, sellers, or both can influence prices.
- In a market economy, prices adjust until quantity supplied equals quantity demanded.
- Market demand is the total sum of individual demands.
Market Shortages and Controls
- Long run shortage is calculated as long run quantity demanded minus long run quantity supplied.
- Price floors are often implemented due to political pressures from suppliers seeking higher prices.
- Price controls exist to ensure goods and services necessary for a comfortable life are accessible.
Price Ceilings and Market Impact
- A price ceiling above equilibrium is considered nonbinding and has no effect on the market.
- A price ceiling below equilibrium is binding and affects the market dynamics.
Employment and Wages
- After an increase in minimum wage, unemployment is generally higher in the long run compared to the short run.
Rent Control Consequences
- Unintended effects of rent control include reduced landlord profits, leading to decreased maintenance of apartments and a shift in preference toward houses.
- Rent-controlled units exhibit low ownership turnover rates.
- Low-income individuals face challenges in securing long-term housing even with rent control in place.
Minimum Wage Context
- The existence of a minimum wage, even when a price ceiling is nonbinding, offers low-income voters hope for improving their financial situation.
- Ineffectiveness of rent control: Many landlords keep rent-controlled units within families, thus limiting accessible housing options for low-income individuals.
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