MICRO 2 p3 government price control (1) được đánh số

1 SUPPLY, DEMAND & GOVERNMENT POLICIES • • • • Consumer’s surplus and Producer’s surplus Price Control: Price Ceiling and Price Floor Market based policies: Tax International trade Evaluating the Market Equilibrium P Market equilibrium: P = $30 Q = 15 (thousand) CS: Consumer surplus PS: Producer’s surplus TS:Total surplus TS = CS + PS 60 S 50 40 CS 30 PS 20 10 D 0 Q 10 15 20 25 30 3 How Price Ceilings Affect Market Outcomes P P S S Price ceiling $1000 Deadweight loss $800 $800 Price ceiling $500 D 300 shortage Q A price ceiling above the equilibrium price is not binding— has no effect on the market outcome 250 400 D Q The equilibrium price ($800) is above the ceiling and therefore illegal The price ceiling is binding, causes a shortage How Price Floors Affect Market Outcomes W W S labor surplus S Price floor $7.25 $6.00 $6.00 Deadweight loss Price floor $5.00 D 500 L A price floor below the equilibrium price is not binding – has no effect on the market outcome D 400 550 L The equilibrium wage ($6) is below the floor and therefore illegal The price floor is binding, causes a surplus How price control affects welfare Items Market Ceiling Price P Quantity demanded A P* PC Quantity supplied S C Surplus/shortage B D E Binding Price Ceiling Consumer’s surplus D Q1 Q* Q2 Q Producer’s surplus Dead weight loss Total surplus How price control affects welfare Items Market Floor Price P Quantity demanded S A Quantity supplied Binding Price Floor PF Surplus/shortage B P* E C Consumer’s surplus D Producer’s surplus Dead Weight loss D Q1 Q* Q2 Q Total surplus a b c d (i) (ii) (iii) (iv) a b c d A price ceiling is binding when it is set above the equilibrium price, causing a shortage above the equilibrium price, causing a surplus below the equilibrium price, causing a shortage below the equilibrium price, causing a surplus A binding price ceiling causes a surplus causes a shortage is set at a price above the equilibrium price is set at a price below the equilibrium price (ii) only (iv) only (i) and (iii) only (ii) and (iv) only Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical As a result of the price ceiling, a the quantity of physicals demanded increases b there is shortage of physicals c the quantity of physicals supplied decreases d All of the above are correct If a nonbinding price floor is imposed on a market, then the a quantity sold in the market will decrease b quantity sold in the market will stay the same c price in the market will increase d price in the market will decrease A binding price floor (i) causes a surplus (ii) causes a shortage (iii) is set at a price above the equilibrium price (iv) is set at a price below the equilibrium price a (i) only b (iii) only c (i) and (iii) only d (ii) and (iv) only Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube As a result of the price floor, the a demand curve for toothpaste shifts to the left b supply curve for toothpaste shifts to the right c quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases d quantity supplied of toothpaste stays the same Price controls The market for hotel rooms is in equilibrium as in the graph P 140 130 S 120 110 • Determine the effects of: A $90 price ceiling B $90 price floor C $120 price floor 100 • Find the dead weight 40 loss (if any) The market for hotel rooms 90 D 80 70 60 50 Q 50 60 70 80 90 100 110 120 130 A $90 price ceiling P 140 The price falls to $90 130 (binding price ceiling below the equilibrium) 110 - The market for hotel rooms S 120 100 Price ceiling Buyers demand 120 rooms 90 Sellers supply 90 70 Shortage 30 60 DWL = 10x15/2=75 40 Q 50 60 70 80 90 100 110 120 130 80 D shortage = 30 50 10 10 B $90 price floor Equilibrium price is above the $90 price floor, so the price floor is not binding P = $100, Q = 100 rooms P 140 The market for hotel rooms 130 S 120 110 100 90 80 Price floor D 70 60 50 40 Q 50 60 70 80 90 100 110 120 130 11 11 C $120 price floor P 140 130 The price rises to $120 120 (binding price floor above 110 the equilibrium) 100 - Buyers demand 60 rooms, 90 80 - Sellers supply 120, 70 60 - Surplus 60 units 50 - DWL = 40x60/2=1200 40 The market for hotel rooms surplus = 60 S Price floor D Q 50 60 70 80 90 100 110 120 130 12 12 Supply, demand and Market equilibrium Given market demand and supply as follows: Demand Qd = 200 – P, Supply Qs = P a Draw the supply and demand curves b Find the equilibrium quantity and price c If government imposes ceiling price at 40, what will happen, find the deadweight loss (if any) d If government imposes floor price at 140, what will happen, find the dead weight loss (if any) 13 Supply, demand and Market equilibrium • Demand: Qd = 200-P • Supply: Qs = P • Market Equilibrium: • P = 100 • Q = 100 • Price Ceiling: 40 (binding) • Qd = 160 • Qs = 40 • Shortage = 120 • DWL = 60x120/2=3600 • Price ceiling: 120 non-binding 220 200 180 160 160 140 120 100 100 80 60 40 40 40 20 0 20 40 60 80 100 120 140 160 180 200 220 14 Supply, demand and Market equilibrium • Demand: Qd = 200-P • Supply: Qs = P • Market Equilibrium: • P = 100 • Q = 100 • Price floor: 140 (binding) • Qd = 60 • Qs = 140 • Shortage = 80 • DWL = 80x40/2=1600 • Price floor: 60 non-binding 220 200 180 160 140 140 120 100 80 60 60 40 20 0 20 40 60 80 100 120 140 160 180 200 220 15 ... Q = 100 • Price Ceiling: 40 (binding) • Qd = 160 • Qs = 40 • Shortage = 120 • DWL = 60x 120 /2= 3600 • Price ceiling: 120 non-binding 22 0 20 0 180 160 160 140 120 100 100 80 60 40 40 40 20 0 20 40 60... Qs = 140 • Shortage = 80 • DWL = 80x40 /2= 1600 • Price floor: 60 non-binding 22 0 20 0 180 160 140 140 120 100 80 60 60 40 20 0 20 40 60 80 100 120 140 160 180 20 0 22 0 15 ... for hotel rooms 130 S 120 110 100 90 80 Price floor D 70 60 50 40 Q 50 60 70 80 90 100 110 120 130 11 11 C $ 120 price floor P 140 130 The price rises to $ 120 120 (binding price floor above 110