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Questions and Answers
The lowest amount a manufacturer can pay factory workers is an example of?
The lowest amount a manufacturer can pay factory workers is an example of?
price floor
Which is an example of a negative incentive for producers?
Which is an example of a negative incentive for producers?
a sharp increase in production costs
What is the difference between a price floor and a price ceiling?
What is the difference between a price floor and a price ceiling?
A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.
In the market, actions known as incentives affect?
In the market, actions known as incentives affect?
Goods that are considered to be needs tend to be?
Goods that are considered to be needs tend to be?
Which statement best describes incentives?
Which statement best describes incentives?
A(n) ____ is a reward or punishment that encourages people to behave in certain ways.
A(n) ____ is a reward or punishment that encourages people to behave in certain ways.
Which is an example of a positive incentive for consumers?
Which is an example of a positive incentive for consumers?
Which statement best explains how elasticity and incentives work together?
Which statement best explains how elasticity and incentives work together?
The graph shows the price of a good compared to the quantity demanded and the quantity supplied. On this graph, the bottom horizontal line represents?
The graph shows the price of a good compared to the quantity demanded and the quantity supplied. On this graph, the bottom horizontal line represents?
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Study Notes
Price Controls
- A price floor is the minimum price that can be charged for a good, preventing prices from falling too low.
- A price ceiling is the maximum price set for a good, preventing prices from rising too high.
- An effective price ceiling is below the market equilibrium, leading to shortages.
Incentives
- Incentives can be either positive (rewards) or negative (punishments), influencing consumer or producer behavior.
- Examples of positive incentives include discounts like coupons, which encourage consumer purchases.
- Negative incentives, such as rising production costs, can discourage producers from supplying goods.
Elasticity
- Elasticity refers to how much the quantity demanded or supplied of a good changes in response to a price change.
- Necessities, categorized as inelastic goods, show little change in demand despite price fluctuations, as consumers need them regardless of cost.
- Elastic goods, like luxury items, typically respond significantly to price changes and associated incentives.
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