最新版微观经济学课件英文版princ-ch06-presentation.ppt

1、 2009 South-Western,a part of Cengage Learning,all rights reservedC H A P T E REconomicsPremium PowerPoint Slides by Ron Cronovich6What are price ceilings and price floors?What are some examples of each?How do price ceilings and price floors affect market outcomes?How do taxes affect market outcomes

2、?How do the effects depend on whether the tax is imposed on buyers or sellers?What is the incidence of a tax?What determines the incidence?1SUPPLY,DEMAND,AND GOVERNMENT POLICIES2Government Policies That Alter the Private Market Outcome Price controlsPrice ceiling:a legal maximum on the price of a go

3、od or service Example:rent control Price floor:a legal minimum on the price of a good or service Example:minimum wage TaxesThe govt can make buyers or sellers pay a specific amount on each unit bought/sold.SUPPLY,DEMAND,AND GOVERNMENT POLICIES3EXAMPLE 1:The Market for ApartmentsEqm w/o price control

4、sPQDSRental price of apts$800300Quantity of apartmentsSUPPLY,DEMAND,AND GOVERNMENT POLICIES4How Price Ceilings Affect Market OutcomesA price ceiling above the eqm price is not binding has no effect on the market outcome.PQDS$800300Price ceiling$1000SUPPLY,DEMAND,AND GOVERNMENT POLICIES5How Price Cei

5、lings Affect Market OutcomesThe eqm price($800)is above the ceiling and therefore illegal.The ceiling is a binding constraint on the price,causes a shortage.PQDS$800Price ceiling$500250400shortageSUPPLY,DEMAND,AND GOVERNMENT POLICIES6How Price Ceilings Affect Market OutcomesIn the long run,supply an

6、d demand are more price-elastic.So,the shortage is larger.PQDS$800150Price ceiling$500450shortageSUPPLY,DEMAND,AND GOVERNMENT POLICIES7Shortages and RationingWith a shortage,sellers must ration the goods among buyers.Some rationing mechanisms:(1)Long lines(2)Discrimination according to sellers biase

7、sThese mechanisms are often unfair,and inefficient:the goods do not necessarily go to the buyers who value them most highly.In contrast,when prices are not controlled,the rationing mechanism is efficient(the goods go to the buyers that value them most highly)and impersonal(and thus fair).SUPPLY,DEMA

8、ND,AND GOVERNMENT POLICIES8EXAMPLE 2:The Market for Unskilled LaborEqm w/o price controlsWLDSWage paid to unskilled workers$4500Quantity of unskilled workersSUPPLY,DEMAND,AND GOVERNMENT POLICIES9How Price Floors Affect Market OutcomesWLDS$4500Price floor$3A price floor below the eqm price is not bin

9、ding has no effect on the market outcome.SUPPLY,DEMAND,AND GOVERNMENT POLICIES10How Price Floors Affect Market OutcomesWLDS$4Price floor$5The eqm wage($4)is below the floor and therefore illegal.The floor is a binding constraint on the wage,causes a surplus(i.e.,unemployment).400550labor surplusSUPP

10、LY,DEMAND,AND GOVERNMENT POLICIES11Min wage laws do not affect highly skilled workers.They do affect teen workers.Studies:A 10%increase in the min wage raises teen unemployment by 1-3%.The Minimum WageWLDS$4Min.wage$5400550unemp-loymentQPS0The market for hotel roomsDDetermine effects of:A.$90 price

11、ceilingB.$90 price floorC.$120 price floor12QPS0The market for hotel roomsDThe price falls to$90.Buyers demand 120 rooms,sellers supply 90,leaving a shortage.shortage=30Price ceiling13QPS0The market for hotel roomsDEqm price is above the floor,so floor is not binding.P=$100,Q=100 rooms.Price floor14

12、QPS0The market for hotel roomsDThe price rises to$120.Buyers demand 60 rooms,sellers supply 120,causing a surplus.surplus=60Price floor15SUPPLY,DEMAND,AND GOVERNMENT POLICIES16Evaluating Price ControlsRecall one of the Ten Principles from Chapter 1:Markets are usually a good way to organize economic

13、 activity.Prices are the signals that guide the allocation of societys resources.This allocation is altered when policymakers restrict prices.Price controls often intended to help the poor,but often hurt more than help.SUPPLY,DEMAND,AND GOVERNMENT POLICIES17TaxesThe govt levies taxes on many goods&s

14、ervices to raise revenue to pay for national defense,public schools,etc.The govt can make buyers or sellers pay the tax.The tax can be a%of the goods price,or a specific amount for each unit sold.For simplicity,we analyze per-unit taxes only.SUPPLY,DEMAND,AND GOVERNMENT POLICIES18S1EXAMPLE 3:The Mar

15、ket for PizzaEqm w/o taxPQD1$10.00500SUPPLY,DEMAND,AND GOVERNMENT POLICIES19S1D1$10.00500A Tax on BuyersThe price buyers pay is now$1.50 higher than the market price P.P would have to fallby$1.50 to makebuyers willing to buy same Q as before.E.g.,if P falls from$10.00 to$8.50,buyers still willing to

16、purchase 500 pizzas.PQD2Effects of a$1.50 per unit tax on buyers$8.50Hence,a tax on buyers shifts the D curve down by the amount of the tax.TaxSUPPLY,DEMAND,AND GOVERNMENT POLICIES20S1D1$10.00500A Tax on BuyersPQD2$11.00PB=$9.50PS=TaxEffects of a$1.50 per unit tax on buyersNew eqm:Q=450Sellers recei

17、ve PS=$9.50Buyers pay PB=$11.00Difference between them =$1.50=tax450SUPPLY,DEMAND,AND GOVERNMENT POLICIES21450S1The Incidence of a Tax:how the burden of a tax is shared among market participantsPQD1$10.00500D2$11.00PB=$9.50PS=TaxIn our example,buyers pay$1.00 more,sellers get$0.50 less.SUPPLY,DEMAND

18、,AND GOVERNMENT POLICIES22S1A Tax on SellersPQD1$10.00500S2Effects of a$1.50 per unit tax on sellersThe tax effectively raises sellers costs by$1.50 per pizza.Sellers will supply 500 pizzas only if P rises to$11.50,to compensate for this cost increase.$11.50Hence,a tax on sellers shifts the S curve

19、up by the amount of the tax.TaxSUPPLY,DEMAND,AND GOVERNMENT POLICIES23S1A Tax on SellersPQD1$10.00500S2450$11.00PB=$9.50PS=TaxEffects of a$1.50 per unit tax on sellersNew eqm:Q=450Buyers pay PB=$11.00Sellers receive PS=$9.50Difference between them =$1.50=taxSUPPLY,DEMAND,AND GOVERNMENT POLICIES24S1T

20、he Outcome Is the Same in Both Cases!What matters is this:A tax drives a wedge between the price buyers pay and the price sellers receive.PQD1$10.00500450$9.50$11.00PB=PS=TaxThe effects on P and Q,and the tax incidence are the same whether the tax is imposed on buyers or sellers!QPS0The market for h

21、otel roomsDSuppose govt imposes a tax on buyers of$30 per room.Find new Q,PB,PS,and incidence of tax.QPS0The market for hotel roomsDQ=80PB=$110PS=$80Incidencebuyers:$10sellers:$20TaxPB=PS=SUPPLY,DEMAND,AND GOVERNMENT POLICIES27Elasticity and Tax IncidenceCASE 1:Supply is more elastic than demandPQDS

22、TaxBuyers share of tax burdenSellers share of tax burdenPrice if no taxPBPSIts easier for sellers than buyers to leave the market.So buyers bear most of the burden of the tax.SUPPLY,DEMAND,AND GOVERNMENT POLICIES28Elasticity and Tax IncidenceCASE 2:Demand is more elastic than supplyPQDSTaxBuyers sha

23、re of tax burdenSellers share of tax burdenPrice if no taxPBPSIts easier for buyers than sellers to leave the market.Sellers bear most of the burden of the tax.SUPPLY,DEMAND,AND GOVERNMENT POLICIES29CASE STUDY:Who Pays the Luxury Tax?1990:Congress adopted a luxury tax on yachts,private airplanes,fur

24、s,expensive cars,etc.Goal of the tax:raise revenue from those who could most easily afford to pay wealthy consumers.But who really pays this tax?SUPPLY,DEMAND,AND GOVERNMENT POLICIES30CASE STUDY:Who Pays the Luxury Tax?The market for yachtsPQDSTaxBuyers share of tax burdenSellers share of tax burden

25、PBPSDemand is price-elastic.In the short run,supply is inelastic.Hence,companies that build yachts pay most of the tax.SUPPLY,DEMAND,AND GOVERNMENT POLICIES31CONCLUSION:Government Policies and the Allocation of ResourcesEach of the policies in this chapter affects the allocation of societys resource

26、s.Example 1:A tax on pizza reduces eqm Q.With less production of pizza,resources(workers,ovens,cheese)will become available to other industries.Example 2:A binding minimum wage causes a surplus of workers,a waste of resources.So,its important for policymakers to apply such policies very carefully.A

27、price ceiling is a legal maximum on the price of a good.An example is rent control.If the price ceiling is below the eqm price,it is binding and causes a shortage.A price floor is a legal minimum on the price of a good.An example is the minimum wage.If the price floor is above the eqm price,it is bi

28、nding and causes a surplus.The labor surplus caused by the minimum wage is unemployment.32A tax on a good places a wedge between the price buyers pay and the price sellers receive,and causes the eqm quantity to fall,whether the tax is imposed on buyers or sellers.The incidence of a tax is the divisi

29、on of the burden of the tax between buyers and sellers,and does not depend on whether the tax is imposed on buyers or sellers.The incidence of the tax depends on the price elasticities of supply and demand.33SUPPLY,DEMAND,AND GOVERNMENT POLICIES34Problems and Applications:2.The government has decide

30、d that the free market price of cheese is too low.a.Suppose the government imposes a binding price floor in the cheese market.Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold.Is there a shortage or surplus of cheese?b.Farmers c

31、omplain that the price floor has reduced their total revenue.Is this possible?Explain.34SUPPLY,DEMAND,AND GOVERNMENT POLICIES35c.In response to farmers complaints,the government agrees to purchase all the surplus cheese at the price floor.Compared to the basic price floor,who benefits from this new

32、policy?Who loses?35SUPPLY,DEMAND,AND GOVERNMENT POLICIES364.Suppose the federal government requires beer drinkers to pay a$2 tax on each case of beer purchased.(In fact,both the federal and state governments impose beer taxes of some sort.)a.Draw a supply-and-demand diagram of the market for beer wi

33、thout the tax.Show the price paid by consumers,the price received by producers,and the quantity of beer sold.What is the difference between the price paid by consumers and the price received by producers?36SUPPLY,DEMAND,AND GOVERNMENT POLICIES37b.Now draw a supply-and-demand diagram for the beer mar

34、ket with the tax.Show the price paid by consumers,the price received by producers,and the quantity of beer sold.What is the difference between the price paid by consumers and the price received by producers?Has the quantity of beer sold increased or decreased?37SUPPLY,DEMAND,AND GOVERNMENT POLICIES3

35、87.Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline.They impose a$0.50 tax for each gallon of gasoline sold.a.Should they impose this tax on producers or consumers?Explain carefully using a supply and demand diagram.38SUPPLY,DEMAND,

36、AND GOVERNMENT POLICIES39b.If the demand for gasoline were more elastic,would this tax be more effective or less effective in reducing the quantity of gasoline consumed?Explain with both words and a diagram.c.Are consumers of gasoline helped or hurt by this tax?Why?d.Are workers in the oil industry helped or hurt by this tax?Why?39