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ECO 100Y1- LA#4- Class Note- 20111003.docx

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Lecture Assignment #4- Interventions – 20111003 Maximum Price (Price Ceiling) Minimum Price ( Price Floor) Quota (Restrict Quantity) Deficiency Payment (Per Unit Subsidy) Excise Tax (Per Unit Tax) #1 Maximum Price (Price Ceiling) - Equilibrium cannot be reached - Effective at keeping the price - Create excess demand - Consumer not satisfiedLeads to.. - Black Market #2 Minimum Price ( Price Floor) - Buy excess supply or the scenario is not effective or sustainable - Buy to give to foreign aid or EXPORT ! What if it is Service? Labour Service?L3-L2= Unemployment - People used to have jobs, don’t have no more or work less hour since the minimum wage is impliedQuota - Higher than equilibrium price - No excess supply - Quantity restricted - Producers find valuable: each unit sell at higher price, smaller quantity produced - Increased in P, Increased in TR, Cost Decreased, Profit Increased - If nothing shift, quote effective Excise Tax- Indirect Tax (Per Unit- $T) - Producer give net of the tax - Consumer buy at P2 - Producer get P3 - Consumer pay tax- pay higher price - Producer get a larger profit - P1-P2= Consumer share - P1+P3= Producer share o Total Tax Revenue Tax Revenue – yellow lined bo
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