Lecture 15_Mar 11_ - Economics 100A Lecture#15 Thursday Mar 11 1)Excise tax again 2)Subsidies 3)Production quotas 4)Import restrictions

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1 Economics 100A Lecture #15: Thursday, Mar. 11 1) Excise tax, again 2) Subsidies 3) Production quotas 4) Import restrictions 5) Introduction to price controls
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2 (1) Excise tax, again Decompose the Consequences for Surplus consumer surplus falls: Δ CS = CS(pd)-CS(p*) < 0 producer surplus falls: Δ PS = PS(ps)-PS(p*) < 0 government takes in tax revenues: t×Qt does society get $1 of value for each $1 tax revenue? some dead weight loss since now ps MC(Qt) Burden of the Tax on consumers on producers on society
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3 D(p) S(p) Q p Q* p* Q t p s = p* - t p d S(p-t)
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4 (2) Subsidies Reverse of a tax Specific subsidy: seller receives: $(p + s)/unit Subsidy, s × Q paid by government Examples Ag commodity price supports Student loans Academic research
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5 D(p) S(p) Q p Q* p* p s p d Q’ S(p+s)
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6 (3) Production quotas Ceiling on firm or industry supply Attempt to (indirectly) boost the price Examples OPEC assigns quotas to its members U.S. Agricultural Dept caps production of crops by imposing acreage limitations Electricity producers limited by the amount of “carbon permits” they hold
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7 D(p) S(p) Q p Q* p* Q Welfare analysis of a quota p d = p s
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8 (4) Import restrictions Tariffs are taxes levied by a government
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This note was uploaded on 03/18/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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Lecture 15_Mar 11_ - Economics 100A Lecture#15 Thursday Mar 11 1)Excise tax again 2)Subsidies 3)Production quotas 4)Import restrictions

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