ECON 1B03 Lecture Notes - Economic Equilibrium, Tax Incidence, Golden Rule

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Econ 1b03 chapter 6&8 supply, demand & government policies. An upper limit on the quantity of the good that can be sold. Government will usually issue a quota license that give producers to produce a specified aount of the good. Example: number of taxis in a city is controlled. In an unregulated market, equilibrium p = and q = 13 million litres per week. The canadian dairy association decides to limit output to increase prices received by producers and avoid surplus. The neat thing about quota is that you can"t over produce this no surplus to worry about. It makes sure the government backs it up by imposing tariffs on imports of milk from the us. This will make milk expensive enough so that consumers won"t buy us milk. The quota is set at 9 million litres per week. At q = 9 million, consumers are willing to pay . 80 per litre (this is the demand price).