BUSS1040 Lecture 9: Lecture 9 - Market Intervention Price Regulation, Taxes & Subsidies

• School: University of Sydney
• Department: Business Studies
• Course: BUSS1040
• Professor: Katrien Stevens

Document Summary

Lecture 9 - market intervention: price regulation, taxes & Raises price and restricts output relative to a competitive market. With a tax or a subsidy, the amount paid by the consumer amount received by producers/ firms price signals no longer consistent. Goods for (cid:449)hi(cid:272)h o(cid:374)e perso(cid:374)"s (cid:272)o(cid:374)su(cid:373)ptio(cid:374) does (cid:374)ot detra(cid:272)t fro(cid:373) a(cid:374)other(cid:859)s (cid:272)o(cid:374)su(cid:373)ptio(cid:374) or enjoyment of the good. Cost imposed on agents other than the consumers or producer of the good. Margi(cid:374)al (cid:271)e(cid:374)efit (cid:894)de(cid:373)a(cid:374)d(cid:895) a(cid:374)d (cid:373)argi(cid:374)al (cid:272)ost (cid:894)supply(cid:895) (cid:272)ur(cid:448)es do (cid:374)ot refle(cid:272)t total or so(cid:272)iety(cid:859)s benefits/ costs. Enacted when the market price is deemed "unfair" Price floor (pf) establishes a minimum price at which a good can be sold. Not binding if set below the equilibrium price. Leads to a surplus if it is binding. A binding price floor causes a surplus (excess supply) Non-price rationing means determine who gets to sell the good or service. Minimum wages leads to a number of outcomes.