Lecture 6 Government Intervention

Lecture 6 Government Intervention - = |Slope of Demand| =...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Restraining the Market Mechanism • Shortages • Black markets with higher prices • Illicit suppliers • Underinvestment • Vested interests that resist change Effects of Price Ceilings
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
• Surpluses • Disposal problems • Unwanted and inefficient discounts • Over investment • Vested interests that resist change Effects of Price Floors
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
WHO PAYS FOR A NEW TAX ON GAS? S 1 S 1 S 0 S 0 D D M E 0 E 1 Q 1 Q 2 $1.14 1.04 1.10 50 30 Quantity t . 1 0 / g a l o n = P X Q Price per Gallon
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Mass Transit SUBSIDY D S 0 S 1 $1 Subsidy per ticket
Background image of page 8
Tax Burden Consumer Burden = |E S | Producer Burden |E D |
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Tax Burden in the case of Linear Demand and Supply Curves Consumer Burden
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: = |Slope of Demand| = Producer Burden |Slope of Supply | RELATIONSHIP BETWEEN MARKET DEMAND AND INDIVIDUAL DEMANDS Alexs demand D A A D 9 $10 Quantity Demanded (a) Naomis demand Z N N Z 6 Quantity Demanded (b) Market demand M C C M 15 Quantity Demanded (c) K Price 6 9 Market demand curve = the horizontal sum of the individual demand curves Negative slope for market demand curves Individual demand curves usually have negative slopes Lower price draws new customers into the market...
View Full Document

Page1 / 12

Lecture 6 Government Intervention - = |Slope of Demand| =...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online