ECN 102 Lecture Notes - Lecture 17: Demand Curve, Income Tax, Price Ceiling
Document Summary
Determine the effects of: price ceiling. Buyers demand 120 rooms, sellers supply 9-, leaving a shortage: price floor. Eq"m price is above the floor, so is not biding. Q = 100 rooms: price floor. Buyers demand 60 rooms, sellers supply 120, causing a surplus. Recall one of the ten principles from chapter 1: Markets are usually a good way to organize economic activity. Prices are the signals that guide the allocation of society"s resources. This allocation is altered when policymakers restrict prices. Price controls often intended to help the poor, but often hurt more than help. The gov"t levies taxes on many goods & services to raise revenue to pay for national defense, public schools, etc. The gov"t can make buyers or sellers pay the tax: the gov"t creates revenue through taxes, income tax is the largest source of gov"t revenue. Income/corporate tax: 2nd largest form of gov"t revenue is consumption tax.
