ECON 110Lecture 12Outline of Last Lecture I. Chapter 7 Continueda. Clicker review: Producer surplusb. Review of Consumer Surplusc. eBay and Producer SurplusII. Chapter 6: Demand and Supply Applicationsa. Groups with other motiveb. Government regulation – Price Controli. Price Ceilingii. Price FloorOutline of Current Lecture I. Price Floorsa. Binding and non-bindingb. Affect on marketII. Taxesa. Definitionb. Tax IncidenceCurrent Lecture – Price Controls ContinuedTo review, price controls can come in several forms, such as price ceilings, price floors, and taxes.Price floors are a legal minimum price for a product. There are two kinds: non-binding and binding, meaning below and above the equilibrium price line. When a price floor is below the equilibrium price, itis non- binding, because the price can still remain at equilibrium.When the price floor is above the equilibrium price, it is binding because it forces the price higher than normal. In the end, it will cause consumers to have to pay higher prices for goods. Minimum wage is a good example of a binding price floor, which affects low-skill workers but not high-skill workers. This demonstrates that price controls disrupt the market by disrupting the process of allocating resources efficiently to those who place the highest value on a good or service.Taxes are levies on economic activity as a means for governments to obtain resources to provide the goods and services that it furnishes to society. It provides benefits to taxpayers through roads, police, fireprotection, etc. However, taxes have negative impact on both buyers and sellers. They create a burden on market participants. They alter behavior, leading buyers and sellers to attempt to avoid or lessen the affect of taxes on their well beingThese 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.Tax incidence is the impact of, and distribution, of the tax burden. However, who actually pays the tax is not
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