DIS 14 Handout - Aniko Oery University of California,...

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Unformatted text preview: Aniko Oery University of California, Berkeley Section 14: Government interventions Econ 100A, MICRO-ECONOMIC ANALYSIS, Spring 2010 In lecture you have discussed the follwing types of government interventions: 1. taxes and subsidies 2. production quotas 3. import tariffs and import quotas 4. price ceiling and price floors. I do not want to go over all the theory again but I would like to remind you of the definition and interpretation of the incidence of tax . It is used to measure the effect of a tax on the prices consumers pay and sellers receive, that is to measure the tax burdens on consumers and producers. Formally, it is just the ratio of the two price changes P d P s = Q P s P Q Q P d P Q = s P d P . Note also, that for an excise tax t P d + P s = t. 1 Practice Problems from the 3rd edition of the textbook Microeconomics by Bersanko and Braeutigam 1. In a perfectly competitive market, the market demand curve is Q d = 10- P d , and the market supply curve is Q s = 1 . 5 P s ....
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DIS 14 Handout - Aniko Oery University of California,...

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