Price control tax and subsidies

Price control tax and subsidies - * * S and price supply m...

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PGP I Term I
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Producer surplus A B C E 50 40 30 Consumer surplus D 1 S 1 Q P
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P max A B C Deadweight loss D 1 S 1 Q P P 1 Shortage Q 3 Q 2 Q 1 ΔCS= -A-B ΔPS=A -C ΔTS= -B-C
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Inefficient allocation among consumers Inefficient allocation of resources due to non- production and or non-consumption. Black market activity
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P max A B C Deadweight loss D 1 S 1 Q P P 1 Q 3 Q 2 Q 1 D 0
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P min A B C D 1 S 1 Q P P 1 Q 3 Q 2 Q 1 D ΔCS= -A-B ΔPS=A -C-D E F
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P support A B C D 1 S 1 Q P P 1 Q 3 Q 2 Q 1 D ΔCS= -A-B ΔPS=A+B+D Govt’s cost=(Q 2 -Q 1 )P support Q g D 1 +Q g
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P support A B C D 1 S 1 Q P P 1 Q 3 Q 2 Q 1 D Cost to the Govt=B+C+D S 2
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P s A B C Deadweight loss D 1 S 1 Q P P 0 P b Q 0 Q 1 D C tax
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d b dt c a t d b bt c a P d b bt c a P dP c t t P P dP c bP a D S S S D S D
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Unformatted text preview: * * S and price supply m equilibriu for Solving ) b(P-a (1) into (2) ng Substituti tax t, a For D S D D S S E E E E E E seller for fraction through Pass buyer for fraction through Pass P b D 1 S 1 Q P P P s Q Q 1 subsidy P A B C Deadweight loss D 1 S 1 Q P P 1 Import Q 3 Q 2 Q 1...
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This note was uploaded on 03/01/2012 for the course STRATEGY Om121 taught by Professor Abhinavdhar during the Spring '12 term at Harvard.

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Price control tax and subsidies - * * S and price supply m...

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