Policy & Labor: key terms, formulas and examples
Governments steer economies with taxes, spending, subsidies, price ceilings, tariffs and minimum wages. Each policy helps some groups and shifts costs to others.
Example
A price ceiling below the market price causes shortages.
Takeaway
Ask who benefits, who pays and what behavior changes.
Key terms
- Subsidy
- Government money that lowers the cost of a product or activity.
- Minimum wage
- The lowest pay the law allows for work.
- Gig economy
- Work done through short, flexible jobs rather than permanent roles.
- Supply shock
- A sudden event that sharply changes the supply of a good.
- Tariff
- A tax on imported goods.
- Price ceiling
- A legal limit on how high a price can go.
- Stagflation
- High inflation combined with slow growth and high unemployment.
- Fiscal policy
- Government spending and taxation choices.
- Unemployment rate
- The share of the workforce without a job.
- Economic growth
- A rise in a country's output over time.
Formulas
Consumer surplusW − P
Producer surplusP − C
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