Incentives Quiz and Flashcards for Economics Concepts

Questions and Answers

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?

a sharp increase in production costs

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?

consumers or producers Signup and view all the answers

Goods that are considered to be needs tend to be?

inelastic when the price changes Signup and view all the answers

Which statement best describes incentives?

incentives can be positive or negative. Signup and view all the answers

A(n) ____ is a reward or punishment that encourages people to behave in certain ways.

incentive Signup and view all the answers

Which is an example of a positive incentive for consumers?

a coupon clipped from a newspaper Signup and view all the answers

Which statement best explains how elasticity and incentives work together?

an elastic good, such as a game, is more likely to respond to incentives. Signup and view all the answers

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?

an effective price ceiling set below equilibrium. Signup and view all the answers

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.

Description

Test your knowledge on elasticity and incentives with these flashcards. Explore key concepts like price floors, price ceilings, and producer incentives. This quiz is perfect for students studying economics or related subjects.