Concepts
- Price Controls
- Price Ceilings
- Price Floors
- Impact on Consumer/Producer Surplus
- Deadweight Loss
- Excise Taxes
- Subsidies
- Tariffs
- Quotas
- How These Policies Affect the Market Price and Quantity
Overview
There are times when the government feels compelled to intervene in a particular market. One way is through the use of tariffs and quotas. Tariffs and quotas deal with international markets. A tariff is a tax on imports and a quota is a cap on imports. Either way, the government is making it more difficult for businesses to get their product to market, and thus the supply goes down. Taxes and subsidies deal with domestic markets. Taxes take money away from businesses and subsidies give free money to businesses. Taxes make it more difficult for businesses while subsidies make it easier for businesses. The last topic is price controls. The government implements price controls if the don’t like the price established by the market. If the government believes the price is too high, they will implement a price ceiling to force the price lower. If they feel the price is too low, they will implement a price floor to force the price higher. We learn to observe the impact of these price controls on the consumer/producer surplus along with the deadweight loss that gets created whenever price controls are implemented.
Materials
Lecture
Price Controls Video
Per-Unit Subsidy Video
Tariffs and Quotas – Effects on Imported Goods and Domestic Prices
Trade Policy – Tariffs and Quotas
Government Policies 1 Lecture
Government Policies 2 Lecture
Quiz
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