Chapter 6 Supply, Demand, Government Policies

Chapter 6 Supply, Demand, Government Policies - Supply,...

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Chapter 6 some positive analysis, some normative considerations Supply, Demand, and Government Policies
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Three Topics 1. Price controls i. Price ceilings ii. Price floors 2. Quantity controls 3. Economics of Taxation (part 1) i. Tax incidence ii. Incentive effects of taxes
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Price Controls Maximum price = price ceiling Minimum price = price floor What makes a max. or
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Price Quantity S D 100 5 4 60 125 7 Max. price at $4
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Who should consume what we produce? In a market without binding price ceilings, people who value the good the most consume the good. In a market with a binding price ceiling, we can’t characterize who gets to consume the good.
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Price Quantity S D 100 5 4 60 125 7 Max. price at $4
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Price Quantity S D 100 5 60 125 7 Min. price at $7
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$ Quantity S D 5 100 Market without price control
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Three Topics Price controls Price ceilings Price floors Quantity controls Economics of Taxation Tax incidence Deadweight loss from taxation
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Chapter 6 Supply, Demand, Government Policies - Supply,...

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