ECON 1201 Lecture Notes - Lecture 8: Deadweight Loss, Price Floor
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Chapter 5 : price controls and quotas- meddling with markets. They do benefit some people (who are typically better organized and more vocal than those who are harmed by them) If the price floor is longstanding, buyers may not have a realistic idea of what would happen without it. Gov"t officials often do not understand supply and demand analysis. Government sometimes controls quantity instead of price: Quota: an upper limit, set by the gov"t, on the quantity of some goods that. Controlling quantities can be bought or sold; also referred to as a quantity control. Quota limit: the total amount of a good under a quota or quantity control that can be legally transacted. License: the right, conferred by the gov"t, to supply a good. The wedge, or quota, rent: the difference between the demand price and supply price at the quota limit. Equal to the market price of the license when the license is traded.
