Lecture20 - Lecture 20 Price floors and ceilings Tax...

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Lecture 20 Price floors and ceilings Tax incidence
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Parking Long-run supply Supply 1 Parking spaces Excess demand Efficient price p1
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Parking Long-run supply Supply 1 Supply 2 price Parking spaces Excess supply Efficient price p1 p2
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Airline regulation In 1930’s the Civil Aeronautics Board (CAB) was established to assign routes, set fares and allocate postal business on interstate routes. Goals: Restrict “destructive competition” that hindered the development of a stable air traffic system. Extend service to smaller communities throughout the country. “Importance of industry” to U.S. economy justified exceptional intervention.
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Airlines Long-run supply price Airline seats Excess supply p min A B C D Q
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“Destructive competition” When fixed costs are large and marginal costs flat over the relevant output range, MC-pricing may not be sufficient to cover long-term costs. We would expect all but one firm to exit the market,
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This note was uploaded on 01/17/2012 for the course ECON 100A taught by Professor Safarzadeh during the Fall '09 term at UC Irvine.

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Lecture20 - Lecture 20 Price floors and ceilings Tax...

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