Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
and Government
Policies
Copyright 2004 South-Western
CONTROLS ON PRICES
Price Ceiling
A legal maximum on the price at which a good can
be sold.
Price Floor
A legal minimum on the price at which a good can
be sold.
Supply
$4
Price
ceiling
3
Equilibrium
price
Demand
100
Equilibrium
quantity
Quantity of
Ice-Cream
Cones
Supply
Equilibrium
price
$3
2
Price
ceiling
Shortage
Demand
75
125
Quantity
supplied
Quantity
demanded
Quantity of
Ice-Cream
Cones
Copyright2003 Southwestern/Thomson Learning
Price of
Gasoline
Supply, S1
1. Initially,
the price
ceiling
is not
binding . . .
Price ceiling
P1
Demand
0
Q1
Quantity of
Gasoline
Copyright2003 Southwestern/Thomson Learning
Price of
Gasoline
S2
2. . . . but when
supply falls . . .
S1
P2
Price ceiling
3. . . . the price
ceiling becomes
binding . . .
P1
4. . . .
resulting
in a
shortage.
Demand
0
QS
QD Q1
Quantity of
Gasoline
Copyright2003 Southwestern/Thomson Learning
Supply
Equilibrium
price
$3
Price
floor
Demand
0
100
Equilibrium
quantity
Quantity of
Ice-Cream
Cones
Copyright2003 Southwestern/Thomson Learning
Supply
Surplus
$4
Price
floor
3
Equilibrium
price
Demand
0
Quantity of
Quantity Quantity Ice-Cream
Cones
demanded supplied
80
120
Wage
Labor
Supply
Equilibrium
wage
Labor
demand
0
Equilibrium
employment
Quantity of
Labor
Copyright2003 Southwestern/Thomson Learning
Wage
Labor surplus
(unemployment)
Labor
Supply
Minimum
wage
Labor
demand
0
Quantity
demanded
Quantity
supplied
Quantity of
Labor
Copyright2003 Southwestern/Thomson Learning
TAXES
Governments levy taxes to raise revenue for
public projects.
Price of
Ice-Cream
Price
Cone
buyers
pay
$3.30
Price
3.00
2.80
without
tax
Price
sellers
receive
Supply, S1
Tax ($0.50)
A tax on buyers
shifts the demand
curve downward
by the size of
the tax ($0.50).
Equilibrium
with tax
D1
D2
90
100
Quantity of
Ice-Cream Cones
Copyright2003 Southwestern/Thomson Learning
S2
Equilibrium
with tax
S1
Tax ($0.50)
A tax on sellers
shifts the supply
curve upward
by the amount of
the tax ($0.50).
Price
sellers
receive
Demand, D1
90
100
Quantity of
Ice-Cream Cones
Copyright2003 Southwestern/Thomson Learning
Wage
Labor supply
Labor demand
0
Quantity
of Labor
Copyright2003 Southwestern/Thomson Learning
Tax
2. . . . the
incidence of the
tax falls more
heavily on
consumers . . .
Demand
Quantity
Supply
3. . . . than on
consumers.
Tax
Price sellers
receive
2. . . . the
incidence of
the tax falls
more heavily
on producers . . .
Demand
Quantity