101 lecture 6 supply demand and government
DESCRIPTION
TaxTRANSCRIPT
Microeconomics !
Lecture 6 !
Supply, Demand, and Government Policies
Quiz Insurance !
Ali Tabbara Monday at 12 noon
S1-46 S2-41
price ceiling price floor tax incidence
Key Terms
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Price
Quantity
Supply
Demand
1. What is the equilibrium price?
2. What is the equilibrium quantity?
3. If the market price was 80, how many pizzas would be sold?
4. If the market price was 30, how many pizza would be sold?
5. If the market price was 80, would there be a shortage, surplus, or equilibrium?
6. If the market price was 30, would there be a shortage, surplus, or equilibrium?
7. What would be the quantity demanded at a price of 80?
8. What would be the quantity supplied at a price of 80?
9. What would be the quantity demanded at a price of 30?
10 Questions
Price
Quantity
Supply
Demand
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QD = QS
Price
Quantity
Supply
Demand
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QD = QS
QS - QD 5 - 5
Price
Quantity
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Demand
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QD = QS
QS - QD 5 - 5
No Shortage No Surplus
Price
Quantity
Supply
Demand
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Price
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QD
Price
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Supply
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QD
Price
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Supply
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QD
Price
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QD
Price
Quantity
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Demand
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QD QS
Price
Quantity
Supply
Demand
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QD QS
QS - QD 8 - 2
Price
Quantity
Supply
Demand
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QD QS
Surplus of 6
QS - QD 8 - 2
Price
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Supply
Demand
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QS
Price
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Demand
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QS
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Demand
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QS
Price
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QS
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QDQS
Price
Quantity
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Demand
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QDQS
QS - QD 3 - 7
Price
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Demand
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QDQS
Shortage of 4
QS - QD 3 - 7
1. What is the equilibrium price? 50
2. What is the equilibrium quantity? 5
3. If the market price was 80, how many pizzas would be sold? 2
4. If the market price was 30, how many pizza would be sold? 3
5. If the market price was 80, would there be a shortage, surplus, or equilibrium? surplus
6. If the market price was 30, would there be a shortage, surplus, or equilibrium? shortage
7. What would be the quantity demanded at a price of 80? 2
8. What would be the quantity supplied at a price of 80? 8
9. What would be the quantity demanded at a price of 30? 7
10. What would be the quantity supplied at a price of 30? 3
10 Questions
Tax Liability
Tax Incidence
Tax Liability
Tax Incidence
Who is legally responsible to pay the tax to the
government
Tax Liability
Tax Incidence
Who is legally responsible to pay the tax to the
government
Who actually pays the tax
Just because I have the Tax Liability does not mean that I have the
Tax Incidence
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Price
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Pizza Tax
Demand
Supply
1. What is the equilibrium price before the tax?
2. What is the equilibrium quantity?
3. If the tax is 20 SAR, what will be the new price?
4. If the tax is 20 SAR, how many pizza would be sold?
5. What will be the total revenue with the new tax?
6. How much tax will the seller pay?
7. How much tax will the buyer pay?
8. How much will the total tax be?
9. How much did the seller earn after paying the tax?
10. Why isn’t the new price 70?
Pizza Tax Questions
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Pizza Tax
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Pizza Tax
Supply no tax
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Pizza Tax
Supply no tax
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Price
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Demand
Pizza Tax
Supply no tax
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Price
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Demand
Pizza Tax
Supply no tax
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Price
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Demand
Pizza Tax
Supply no tax
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Price
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Demand
Pizza Tax
Supply no tax
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Price
Quantity
Demand
Pizza Tax
Supply no tax
Tax on Supplier of 20 Shift the curve up by 20
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Price
Quantity
Demand
Pizza Tax
Supply no tax
Tax on Supplier of 20 Shift the curve up by 20
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Price
Quantity
Demand
Pizza Tax
Supply no tax
Tax on Supplier of 20 Shift the curve up by 20
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0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Tax on Supplier of 20 Shift the curve up by 20
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10
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0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Tax on Supplier of 20 Shift the curve up by 20
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10
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100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
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10
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30
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80
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0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
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10
20
30
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80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
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10
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30
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70
80
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100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
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10
20
30
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50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
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50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Seller Price
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
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50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Seller Price
Taxes of 20
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
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10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Seller Price
Taxes of 20
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Seller Price
Taxes of 20
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
0
10
20
30
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50
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70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Demand
Pizza Tax
Buyer Price
Seller Price
Taxes of 20
Supply no tax
Supply with tax
Tax on Supplier of 20 Shift the curve up by 20
• Taxes discourage market activity • Value creation is reduced • Buyers and sellers share the burden • Buyers pay more, sellers receive less
Taxes