2-E AP Microeconomics Government Intervention Price Controls and Taxes - Unit 2 Supply Demand and Consumer Choice 1 REMEMBER THE STEPS 2 Government

2-E AP Microeconomics Government Intervention Price Controls and Taxes

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Unit 2: Supply, Demand, and Consumer Choice 1
REMEMBER THE STEPS! 2
Government Involvement #1-Price Controls: Floors and Ceilings #2-Import Quotas #3-Subsidies #4-Excise Taxes 3
#1-PRICE CONTROLS Who likes the idea of having a price ceiling on gas so prices will never go over $1 per gallon? 4
Q o $5 4 3 2 1 P 10 20 30 40 50 60 70 80 5 D S Shortage (Qd>Qs) Maximum legal price a seller can charge for a product. Goal: Make affordable by keeping price from reaching Eq. Gasoline Does this policy help consumers? Result: BLACK MARKETS Price Ceiling Price Ceiling To have an effect, a price ceiling must be below equilibrium
Q o $ 4 3 2 1 P 10 20 30 40 50 60 70 80 6 D S Surplus (Qd<Qs) Minimum legal price a seller can sell a product. Goal: Keep price high by keeping price from falling to Eq. Corn Does this policy help corn producers? Price Floor Price Floor To have an effect, a price floor must be above equilibrium
Practice Questions

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