ECON 1050 Chapter Notes - Chapter 6: Social Cost, Marginal Cost, Avoidance Speech
Document Summary
Search activity: time spent looking for something to do business with. Black market: an illegal market in which the equilibrium price exceeds the price ceiling. Inefficiency of a rent ceiling: because the quantity supplied is less than the efficient quantity, there is a dwl. The rectangle represents potential loss from increased search activity. Inefficiency of minimum wage: dead weight loss is created because the quantity of labour employed is less than the efficient quantity. Tax incidence: is the division of the burden of a tax between buyers and sellers. Employment insurance tax: a tax that the federal government imposes equally on buyers and sellers of labour. *** the more inelastic the demand, the larger the amount of the tax paid by buyers. Taxes and efficiency: tax makes marginal social benefit exceed marginal social cost, shrinks producer and consumer surplus, creates dead weight loss.