This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: from S 1 to S 2 . The result is a rise in the price buyers pay for guns from P 1 to P 2 , and a decline in the quantity of guns from Q 1 to Q 2 . 2 Figure 2 c. Figure 3 shows the effect of a binding price floor on guns. The increase in price from P 1 to P f leads to a decline in the quantity of guns from Q 1 to Q 2 . There is excess supply in the market for guns, because the quantity supplied ( Q 3 ) exceeds the quantity demanded ( Q 2 ) at the price P f . Figure 3 d. Figure 4 shows the effect of a tax on ammunition. The tax on ammunition reduces the demand for guns from D 1 to D 2 , because ammunition and guns are complements. The result is a decline in the price of guns from P 1 to P 2 , and a decline in the quantity of guns from Q 1 to Q 2 . 3 Figure 4...
View Full Document
- Spring '07