Principles of Economics- Mankiw (5th) 113

Principles of - demand and thereby change the equilibrium price and quantity This chapter offers our first look at policy Here we analyze various

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IN THIS CHAPTER YOU WILL . . . See how the burden of a tax is split between buyers and sellers Consider how a tax on a good affects the price of the good and the quantity sold Examine the effects of government policies that place a ceiling on prices Examine the effects of government policies that put a floor under prices Learn that taxes levied on buyers and taxes levied on sellers are equivalent Economists have two roles. As scientists, they develop and test theories to explain the world around them. As policy advisers, they use their theories to help change the world for the better. The focus of the preceding two chapters has been scien- tific. We have seen how supply and demand determine the price of a good and the quantity of the good sold. We have also seen how various events shift supply and
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Unformatted text preview: demand and thereby change the equilibrium price and quantity. This chapter offers our first look at policy. Here we analyze various types of government policy using only the tools of supply and demand. As you will see, the analysis yields some surprising insights. Policies often have effects that their architects did not intend or anticipate. We begin by considering policies that directly control prices. For example, rent-control laws dictate a maximum rent that landlords may charge tenants. Minimum-wage laws dictate the lowest wage that firms may pay workers. Price controls are S U P P L Y , D E M A N D , A N D G O V E R N M E N T P O L I C I E S 117...
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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