ECON281 Lecture 10: Econ 281 - Lecture 10.docx
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ECON281 Full Course Notes
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Objectives: deadweight loss, a perfectly competitive market without intervention maximizes total surplus, government intervention who wins and who loses, examples of various government policies, excise taxes, subsidies, price ceilings and floors, production quotas e. 10. 1 the invisible hand, excise taxes, and subsidies. Economic efficiency: economic efficiency means that the total surplus is maximized. What is the relative incidence of a specific tax on consumers and. Interpretation: consumers pay four times as much as the decrease in price producers receive. Hence, an excise tax of . 00 results in an increase in consumer price of sh. 80 and a decrease in price received by producers of sh. 20 . Policy: price ceilings: a price ceiling is a legal maximum on the price per unit that a producer can receive. If the price ceiling is below the pre-control competitive equilibrium price, then the ceiling is called binding. Policy: price floor: a price floor is a minimum price that consumers can legally pay for a good.
