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Government%20Interventions%20in%20Market%20Equilibrium

Government%20Interventions%20in%20Market%20Equilibrium -...

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©Prep101 Government Interventions in Market Equilibrium Policy Type How it works Who gains Who loses Good Effect Bad Effect Minimum Wage Price Floor Sets a minimum legal wage at which labor can work Current low income workers Prospective workers Average income of workers increases More unemployment Rent Control Price Ceiling Sets a maximum legal rent that landlords can charge Current tenants Landlords and prospective tenants Low income groups can afford housing Housing shortage Offer to Purchase Price Support Sets a price floor that raises prices, and the
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Unformatted text preview: government buys the excess supply Farmers Consumers Raises farmers’ incomes Leads to accumulation of excess supply that is wasted Deficiency Payment Subsidy The government gives a subsidy to farmers, which lowers consumer prices Farmers and consumers The government Both farmers and consumers are better off Government revenue is has to be spent on the subsidy Quota Quantity limit Farmers are not allowed to produce more than the quota quantity Farmers Consumers Raises farmers’ incomes Consumers are worse off due to higher prices...
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