Consumer and Producer
Consumer A would pay $10
for a good whose market
price is $5 and therefore
Tax of a certain amount of money per unit sold.
Incidence of a Tax
Pb is the price (including the
tax) paid by buyers. Ps is the
price that sellers receive, less
Here the burden of the ta
Change in Consumer and Producer
Surplus from Price Controls
The price of a good has been
import quota Limit on the quantity of a good that can be imported.
tariff Tax on an imported good.
IMPORT TARIFF OR QUOTA
THAT ELIMINATES IMPORTS
In a free market, the domestic price
equals the world price Pw.
"economic efficiency Maximization of aggregate
consumer and producer surplus.
"market failure Situation in which an unregulated
competitive market is inefficient because prices fail to
The Labor Market: Definitions, Facts, and Trends
Industries and Occupations: Adapting to Change
The labor-market changes occurring in a dynamic economy
There are sectoral changes in jobs some jobs have
expanded over the years while some have
The Short-Run Demand for Labor When Both
Product and Labor Markets Are Competitive
! When both product and labor markets are
competitive, it is assumed that:
All producers or sellers are price takers in the
All employers of labor are wage
!For products price-taking and inputs price-taking firm, profitmaximizing decisions by a firm mainly involve the question of
whether, and how, to increase or decrease output.
!The search for profit improving possibilities means that sm
"price support Price set by government above freemarket level and maintained by governmental purchases
of excess supply.
To maintain a price Ps above the
"subsidy Payment reducing the buyers price below the
sellers price; i.e., a negative tax.
Conditions needed for the market to clear with a subsidy:
QD = QD(Pb)
QS = QS(Ps)
QD = QS
Ps Pb = s
Price is regulated to be no lower
Producers would like to supply Q2,
but consumers will buy only Q3.
If producers indeed produce Q2,
the amount Q2 Q3 will go unsold
and the change in producer