4. Market Interventions

4. Market Interventions - Principles of Microeconomics...

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Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 4. Market Interventions
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Price controls: Ceilings Ceiling = maximum price Quantity 0 10 Price 10 4 5 3 2 Supply Demand Excess demand Disequilibrium phenomenon
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Price controls: Ceilings Quantity 0 4 10 Price 10 3 2 Supply Demand Producer surplus Consumer surplus Deadweight loss
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Price controls: Floors Floor = minimum price Quantity 0 10 Price 10 4 5 7 2 Supply Demand Excess supply Disequilibrium phenomenon
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Price controls: Floors Quantity 0 4 10 Price 10 7 2 Producer surplus Consumer surplus Deadweight loss Demand Supply
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Quantity controls: Quotas Quota = maximum qty. Quantity 0 10 Price 10 4 5 7 2 Supply Demand Equilibrium phenomenon relative to the effective supply Effective Supply
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Taxes and Subsidies Two kinds Per-unit: Ad valorem:
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Per-unit taxes on sellers Tax = $3/unit Quantity 0 5 10 5 10 Price
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Per-unit taxes on sellers : Incidence BEFORE Buyer pays: Seller receives: Quantity 0 10 Price 10 4 5 3 Supply Demand
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4. Market Interventions - Principles of Microeconomics...

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