ECONS 101 – 1st Edition Lecture 10 Outline of Last Lecture I. Consumer & Producer SurplusOutline of Current Lecture I. Consumer & Producer Surplus (Cont.)Current LecturePrice Ceiling: How high can the price go?- The maximum price sellers are allowed to charge for a product or service.- If a price ceiling is set below equilibrium – total surplus decreases.Price Floor: How low can the price go?- The minimum price buyers are required to pay for a product or service.o Think of minimum wage  employees can receive MORE than the minimum wage but cannot be paid less than where the wage is set.Price Control Example:- Consider the following supply and demand expressions:QD = 20 - 4PQS = 8P – 4- At equilibrium QD = QS } Q*. To find the equilibrium price or P*, set QD = QS:20 – 4 = 8P – 4  P* = 2. Then, substitute P* into either expression and solve for Q* (Q* = 12).- Next, to find the initial surplus, two more prices must be found:Choke Price for Demand (PC when QD = 0)QD = 20 – 4P  0 = 20 – 4P  PC = 5These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Where P is the price, QD is the quantity demanded and QS is quantity supplied.Shut-Down Price for Supply (PS when QS = 0)QS = 8P – 4  0 = 8P – 4  PS = 0.5Quotas – Controlling Quantities- A maximum amount that can be legally traded.o Government saying, “This is how much will be put into the market.”- A similar instrument is a license.o Driver’s license confers to you the right to drive a caro Export/Import license confer to you the right to export or import a good or service. o Franchises: You can’t just OWN a Subway  first, you must pay the company to own a store or shop within the franchise.- Wedge: the difference between demand price and supply price.o If demand price is ($6) and the supply price is ($4), then the wedge is