stock }
•
Used
capacity
↳
producers spare capacity } avalible stock
supply elastic
stored : more elastic ( longer life + more Qs stored -
less scarce d)
perishable : more inelastic
capacity : half
capacity can still provide
The elastic your side)
more supply ,
the more
money ( producers
↳ better for producers
change in $ → oooiosrlñioocu
=
deadweight loss
1. Ban beer
Deadweight (welfare) consumption
'
loss sttax 2. Reduce consumer surplus
-
s
ex $10 es
=
rev
.
es
, gov .
P,
q
- - - -
p
✗
{
I
$2 GR
-0€ f surplus
=
Deadweight
-
A
producer
-
Pe loss
Rev -9
,
- - - - -
f f o lost of economical efficiency when the
socially
'
'
is not
$8 PS Ps
I 1
optimal quantity of gls produced
I 1 D
Q QE
;
2.7 Government in Markets
Reasons for gov . intervention
raise revenue to public service
-
pay
support producers
-
-
support for households on low income
influence the level
of production in markets ( reduce neg impact } subsidize good)
-
.
influence level of consumption
-
Indirect tax
i.
Ad valorem tax VAT (sales tax) fixed % you pay added to a price of a
good
,
↳
regressive =
spend more , pay more tax
of price given
i.
specific tax or
duty a set amount to good
, Market
Analysis of an indirect tax
Price ( thousand )
" cigarettes
$10 -
- -
- - - -
- - - -
y
l
l
l
l
l
l
l
l
l
l
$3 1
! D
50
( thousand)
Quantity
consumer d Consumer surplus
CS =
tbh =
500,000
CS =
f- bh
=
1-21201150,000 )
> consumer expenditure ( how much consumer spend)
( f =P ✗ Q = 500,000
10×50,000
=
Producer 2 Producer surplus
PS =
tbh =
175,000
=
f- (7) 150,000)
producer revenue ( how much
producer spend )
PE =P ✗ Q =
500,000
=
10×50,000
Government twin / losing
welfare d
Allocatively efficient
•
Used
capacity
↳
producers spare capacity } avalible stock
supply elastic
stored : more elastic ( longer life + more Qs stored -
less scarce d)
perishable : more inelastic
capacity : half
capacity can still provide
The elastic your side)
more supply ,
the more
money ( producers
↳ better for producers
change in $ → oooiosrlñioocu
=
deadweight loss
1. Ban beer
Deadweight (welfare) consumption
'
loss sttax 2. Reduce consumer surplus
-
s
ex $10 es
=
rev
.
es
, gov .
P,
q
- - - -
p
✗
{
I
$2 GR
-0€ f surplus
=
Deadweight
-
A
producer
-
Pe loss
Rev -9
,
- - - - -
f f o lost of economical efficiency when the
socially
'
'
is not
$8 PS Ps
I 1
optimal quantity of gls produced
I 1 D
Q QE
;
2.7 Government in Markets
Reasons for gov . intervention
raise revenue to public service
-
pay
support producers
-
-
support for households on low income
influence the level
of production in markets ( reduce neg impact } subsidize good)
-
.
influence level of consumption
-
Indirect tax
i.
Ad valorem tax VAT (sales tax) fixed % you pay added to a price of a
good
,
↳
regressive =
spend more , pay more tax
of price given
i.
specific tax or
duty a set amount to good
, Market
Analysis of an indirect tax
Price ( thousand )
" cigarettes
$10 -
- -
- - - -
- - - -
y
l
l
l
l
l
l
l
l
l
l
$3 1
! D
50
( thousand)
Quantity
consumer d Consumer surplus
CS =
tbh =
500,000
CS =
f- bh
=
1-21201150,000 )
> consumer expenditure ( how much consumer spend)
( f =P ✗ Q = 500,000
10×50,000
=
Producer 2 Producer surplus
PS =
tbh =
175,000
=
f- (7) 150,000)
producer revenue ( how much
producer spend )
PE =P ✗ Q =
500,000
=
10×50,000
Government twin / losing
welfare d
Allocatively efficient
