101 lecture 8
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Transcript of 101 lecture 8
Microeconomics Chapter 8
!
Taxation
Subsidy
Subsidy
opposite of a tax
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Government Price
Minimum
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Minimum
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Government Price
Minimum
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Government Price
MinimumLoss
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Government Price
MinimumLoss
Loss
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Government Price
MinimumLoss
Loss
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Government Price
MinimumLoss
Loss
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Demand
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Surplus
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Government Price
MinimumLoss
Loss
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Demand
SupplyConsumer
Surplus
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Government Price
MinimumLoss
Loss
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Demand
SupplyConsumer
Surplus
Producer Surplus
Government Price
Minimum Consumer Loss Producer Gain Loss
Loss
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Demand
SupplyConsumer
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Producer Surplus
Consumer Surplus Area Before = 125 After = 45 Change = Lose 80
Government Price
Minimum Consumer Loss Producer Gain Loss
Loss
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Government Minimum Price
Demand
SupplyConsumer
Surplus
Producer Surplus
Consumer Surplus Area Before = 125 After = 45 Change = Lose 80
Producer Surplus Area Before = 125 After = 165 Change = Gain 40
Government Price
Minimum Consumer Loss Producer Gain Loss
Loss
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Demand
SupplyConsumer
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Producer Surplus
Consumer Surplus Area Before = 125 After = 45 Change = Lose 80
Producer Surplus Area Before = 125 After = 165 Change = Gain 40
Total Surplus Area Before = 250 After = 210 Deadweight Loss = 40
Government Price
Minimum Consumer Loss Producer Gain Loss
Loss
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Loss
Loss
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SupplyConsumer
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Maximum
Loss
Loss
Government Maximum Price
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SupplyConsumer
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Government Price
Maximum
Loss
Loss
Government Maximum Price
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Government Price
Maximum
Loss
Loss
Government Maximum Price
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SupplyConsumer
Surplus
Producer Surplus
Government Price
Maximum
Consumer Gain Producer Loss
Loss
Loss
Government Maximum Price
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Demand
SupplyConsumer
Surplus
Producer Surplus
Consumer Surplus Area Before = 125 After = 140 Change = Gain 15
Government Price
Maximum
Consumer Gain Producer Loss
Loss
Loss
Government Maximum Price
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Price
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Demand
SupplyConsumer
Surplus
Producer Surplus
Consumer Surplus Area Before = 125 After = 140 Change = Gain 15
Producer Surplus Area Before = 125 After = 20 Change = Loss 105
Government Price
Maximum
Consumer Gain Producer Loss
Loss
Loss
Government Maximum Price
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SupplyConsumer
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Producer Surplus
Consumer Surplus Area Before = 125 After = 140 Change = Gain 15
Producer Surplus Area Before = 125 After = 20 Change = Loss 105
Total Surplus Area Before = 250 After = 160 Deadweight Loss = 90
Government Price
Maximum
Consumer Gain Producer Loss
Loss
Loss
Government Maximum Price
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Demand
Supply1
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Supply1
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Demand
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Consumer Surplus
Supply1
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Supply2
Supply1
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Supply2
Supply1
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Supply2
Supply1
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Demand
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Supply2
Supply1
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Supply2
Supply1
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Total Surplus Before = 250 After = 90 Change = Loss 160
Supply2
Supply1
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Supply Shift
Demand
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Producer Surplus
Total Surplus Before = 250 After = 90 Change = Loss 160
Supply2
Supply1
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Supply Shift
Demand
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Producer Surplus
Total Surplus Before = 250 After = 90 Change = Loss 160
Supply2
Supply1
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Demand
SupplySR
Q
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Demand
SupplySR
Q
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Demand
SupplySR
Q
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Demand
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Buyer Surplus
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Demand
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Demand
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Buyer Surplus
Seller Surplus
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Buyer Surplus
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Seller Surplus
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Demand
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QQd
Buyer Surplus
Minimum Price
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Buyer Surplus
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Buyer Surplus
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Seller Surplus
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QQd Qs
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
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QQd QsSurplus
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
A
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
A
B Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
A
BC
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
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BC
D
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
A
BC
D E
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
A
BC
D E
F
Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
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BC
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Buyer Surplus
Minimum Price
Seller Surplus
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Demand
SupplySR
QQd QsSurplus 7-3 = 4
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F
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Seller Surplus
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Demand
SupplySR
Q
Buyer Surplus
Qd QsSurplus 7-3 = 4
A
BC
D E
F
Minimum Price
Seller Surplus
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Demand
SupplySR
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Qd QsSurplus 7-3 = 4
A
BC
D E
F
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Seller Surplus
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Qd QsSurplus 7-3 = 4
A
BC
D E
F
Minimum Price
Seller Surplus
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Demand
SupplySR
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Qd QsSurplus 7-3 = 4
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
SellersMinimum Price
Seller Surplus
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Demand
SupplySR
Q
Buyer Surplus
Qd QsSurplus 7-3 = 4
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
Sellers
Sellers Lose E to
deadweight loss but gain B from
Buyers
Minimum Price
Seller Surplus
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Demand
SupplySR
Q
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Qd QsSurplus 7-3 = 4
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
Sellers
Sellers Lose E to
deadweight loss but gain B from
Buyers
A =( (100-70) x 3) ÷ 2 = 45 B= 20 x 3 = 60 C = (70-50) x (5-3) ÷2 =20 D = 60 E = 20 F = 45
Minimum Price
Seller Surplus
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Demand
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100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
Q
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
Q
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
Q
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs Qd
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs Qd
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
Buyer Surplus
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
B
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
FMaximum
Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
FMaximum
Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
FMaximum
Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
F
Buyers Lose C to
deadweight loss but gain D from
Sellers
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
F
Buyers Lose C to
deadweight loss but gain D from
Sellers
Sellers Lose E to
deadweight loss and lose D to
buyers
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
SupplySR
QQs QdShortage 8-2 = 6
A
BC
D E
F
Buyers Lose C to
deadweight loss but gain D from
Sellers
Sellers Lose E to
deadweight loss and lose D to
buyers
A = 20 B = 60 C = 45 D = 60 E = 45 F = 20
Maximum Price
Seller Surplus
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax Analysis
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Buyer Surplus
Tax Analysis
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Buyer Surplus
Seller Surplus
Tax Analysis
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax Analysis
Tax on Seller with shift Supply curve up by the amount of the tax
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax Analysis
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax Analysis
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
40
40
40
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
40
40
40
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
B
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Taxes Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
taxes
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Taxes Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
taxes
Sellers Lose E to
deadweight loss and lose D to
taxes
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
Taxes Tax of 40 SAR
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Demand
Supply with no tax
A
BC
D E
F
Buyers Lose C to
deadweight loss and lose B to
taxes
Sellers Lose E to
deadweight loss and lose D to
taxes
Tax AnalysisSupply
with 40 SAR tax
Tax on Seller with shift Supply curve up by the amount of the tax
TaxesGovernment gains B from buyers and D from sellers
Tax of 40 SAR