ECON 208 Lecture Notes - Lecture 7: Demand Curve, Excess Supply, Price Floor

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Eesha Sen Choudhury

Document Summary

Midterm: 30-35 mc questions, may alter to add 2-3 short written answers (will reduce # of mc to compensate) Look at how elasticity matters: (different example than text: whenever 2 curves intersect --> elasticity is relevant to application so sometimes we can also use slopes to compare. Flat tax/fixed tax = excise tax: ex tax on gasoline/cigarettes - not percentage tax, it is paid in x, ex crossing the border - paying tax on goods is in x$ Graph: 2 supply curves, supply curve without the tax, amount supplier gets to keep (without the tax, supply curve with the tax. Left: = shift supply up : demand is less elastic than supply, steeper one is less elastic than the flatter one. Incidence on consumer: supply side absorbs very little (incidence is low, right, demand is quite elastic (flat, supply curve is more elastic (steeper)