Chapter 6_Slides.ppt

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Chapter 6
Supply, Demand, and
Government Policies
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In this chapter,
look for the answers to these questions:
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What 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?
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?
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Government Policies That Alter the
Private Market Outcome
Price controls
Price ceiling: a legal maximum on the price
of a good or service Example: rent control
Price floor: a legal minimum on the price of
a good or service Example: minimum wage
Taxes
The govt can make buyers or sellers pay a
specific amount on each unit bought/sold.
We will use the supply/demand model to see
how each policy affects the market outcome
(the price buyers pay, the price sellers receive,
and eq’m quantity).
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