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Unformatted text preview: inefficient and also it is unfair. When prices are not controlled, the rationing mechanism is efficient and impersonal.-Price Floor A price floor below the eq. is not binding and does not have an effect on the market. -Evaluating Price Controls Prices are the signals that guide the allocation of societys resources. This allocation is altered when policymakers restrict prices. Price controls often intended to help the poor, but often hurt more then help.-Taxes discourage market activity. When a good is taxed, the quantity of the good sold is smaller in the new equilibrium.-Elasticity and Tax Incidence Case 1: Supply is more elastic than demand Case 2: Demand is more elastic than supply...
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- Spring '08