2/18 - Government Interventions 2 major forms Price...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
2/18/08 Government Interventions 2 major forms: Price Controls and Taxation 2 forms of price controls: Price Ceiling- cannot charge more than a certain amount for a product Price floor- cannot pay less than a certain amount for a product In both cases, only “binding” if equalibrium price is rendered illegal Classic examples: price ceiling- rent control, usary laws (restrict interest laws) Price floor- agricultural “supports,” minimum wage Government Intervention features both an intended and an unintended consequence. i.e. cost and benefit Proportion of intended vs. unintended consequence varies with elasticity, but the consequences are also being considered by an individual. To see how the picture works, recall how the equalibrium is first determined Surplus consists of a segment of new quantity supplied and a segment of lost transactions , (Q – Q ). The split between these two segments will change with changing elasticities. Test question
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/18/2008 for the course ECO 2023 taught by Professor O'gorman during the Spring '08 term at South Florida Community College.

Page1 / 2

2/18 - Government Interventions 2 major forms Price...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online