Ch.6_Supply, Demand, and Government Policies

Ch.6_Supply, Demand, and Government Policies - II. Taxes:...

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I. Price Controls: legal restriction on how high or low a market price can go. 2 Types: 1.Price Ceilings : The legal Maximum Price a seller can charge for a product or service. A. Example Rent Controls in NYC If Binding creates: Page 1 of 9
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B. Problems with Price Ceilings 1) Inefficient Allocation to consumers 2) Inefficient Low Quality 3) Wasted Resources 4) Black Markets
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2.Price Floors : A Minimum Price imposed by Gov’t. A. Example If Binding Creates: Page 3 of 9
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B. Problems with Price Ceilings 1) Inefficient Allocation to sales among Sellers 2) Inefficient High Quality 3) Wasted Resources 4) Black Markets
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Unformatted text preview: II. Taxes: Tax on Sellers Page 5 of 9 Tax on Buyers Conclusion: Chapter 6: Supply, Demand, & Government Policies Incidence: of a tax is who bears the burden of a tax The Incidence of the tax depends on the Price Elasticity of Demand and Supply Example: Which one is less elastic_______________? Page 7 of 9 Example: Which one is less elastic_______________? So elasticitynot who officially pays the tax determines the incidence of an excise tax. The Incidence Tax Burden falls more heavily on the side of the market that is less elastic. Chapter 6: Supply, Demand, & Government Policies Page 9 of 9...
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Ch.6_Supply, Demand, and Government Policies - II. Taxes:...

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