Jingxian TA4 - ECON1110 TA Section 4 Professor Jennifer...

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ECON1110 TA Section 4 Professor Jennifer Wissink TA Jingxian Zheng Feb 12, 2009 1 Concepts Review Price floor: Government established minimal selling price Government thinks the market price is too low Floor must be above the equilibrium price P * Causes surplus e.g.: minimum wage (Graph 1) Price ceiling: Government established maximal selling price Government thinks the market price is too high Floor must be below the equilibrium price P * Causes shortage e.g.: gas price ceiling in 1974 (Graph 2) So in a market: P f > P * > P c 2. Commodity Taxes GOVERNMENT decides who it will collect the tax revenue from [the Statutory Inci- dence] MARKET decides who will really pay tax [the Economic Price Incidence (EPI)] (Graph 3) 3. Consumers’ Surplus, Producers’ Surplus, Net Social Surplus consumers’ surplus on a give unit: $ Marginal Benefit-$ P (more usual) on a total quantity = Q 0 : $Total Benefit-$ Total Expenditure Producers’ surplus on a give unit: $ P -$ Marginal Cost (more usual) on a total quantity = Q 0 : $Total Revenue-$ Total Variable Cost Net Social Surplus: the gain from trade, regardless of who gets it. (consumers, producers, government. ..) 1
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4. Elasticity:
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This note was uploaded on 09/19/2009 for the course ECON 101 taught by Professor Burkhauser during the Fall '08 term at Cornell University (Engineering School).

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Jingxian TA4 - ECON1110 TA Section 4 Professor Jennifer...

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