Government Price Control Policies and Economic Efficiency

Government price control policies and economic efficiency
1 / 25
0
0
1357 days ago, 549 views
PowerPoint PPT Presentation

Presentation Transcript

Slide 1

´╗┐Government Price Control Policies and Economic Efficiency

Slide 2

Why does the administration require value control strategies? Two value control strategies: value roof and value floor . Effects of government value control arrangements on market results. Lessons that we can gain from government value strategies. What we will realize in this class

Slide 3

Why does the administration need to manage showcase costs? A focused market free of government directions is effective when it is at harmony. Nonetheless, a few providers or demanders may not be happy with the market harmonies. As an aftereffect of such disappointment, they may attempt to campaign the administration to force value control approaches.

Slide 4

What sort of value control strategies the administration may receive? Value roof (if demanders win): is a legitimately decided most extreme value that venders may charge. Value floor (if providers win): is a legitimately decided least value that venders may get.

Slide 5

Impacts of government value control strategies on market Price roof : Example: Rent control Price floor : Example: Minimum wage

Slide 6

Price Ceiling: Rent Control in New York City It goes back to the lodging deficiency taking after World War II and by and large applies to structures developed before 1947 in New York City. Lease control is proposed to shield occupants in exclusive structures from illicit lease increments.

Slide 7

P S Rental cost of apts $800 D Q 300 Quantity of flats Price Ceiling: Rent Control The Market for Apartments without Price Ceiling Equilibrium without value controls

Slide 8

P S Price roof $500 deficiency D Q 400 250 Price Ceiling: Rent Control The Market for Apartments with Price Ceiling that is restricting The eq'm value ($800) is over the roof and along these lines illicit. The roof is a coupling limitation on the cost, and causes a deficiency. $800

Slide 9

Effects of A Binding Rent Control A coupling rent control makes a lack of flats: long holding up records. Non-value proportioning: all the more low wage families will be unable to discover a flat to lease. It additionally supports Black Market.

Slide 10

Summary: showcase results of government value roof approach Price roof lessens advertise effectiveness (deficiency). Non-value proportioning. Interestingly, a focused harmony advertise without value controls is more effective.

Slide 11

Price Floor: Minimum Wage Minimum wage in Pennsylvania has ascended to $6.25 beginning Jan. 1, 2007 and will keep on increasing to $7.15 on July 1, 2007. It has been intended to ensure those with low abilities, low training and adolescent laborers.

Slide 12

W S Wage paid to incompetent specialists $4 D L 500 Quantity of untalented laborers Price Floor: Minimum Wage Unskilled work showcase without the lowest pay permitted by law Eq'm w/o value controls

Slide 13

work surplus W S Price floor $7.15 $6 D L 400 550 Price Floor: Minimum Wage Unskilled work advertise with a coupling the lowest pay permitted by law The balance wage ($6) is beneath the floor and accordingly illicit. The floor is a coupling imperative on the wage, and causes a surplus ( i.e., unemployment).

Slide 14

Market Outcomes of A Binding Minimum Wage A coupling the lowest pay permitted by law makes an excess of incompetent laborers. (more unemployment). non-value apportioning: bosses may separate certain sorts of occupation candidates. more work supply from young people: individuals in need may wind up losing occupations.

Slide 15

Summary: Market results of government value floor arrangement Price floor decreases advertise productivity (excess). Non-value apportioning. Interestingly, the aggressive harmony showcase without value floor is more proficient.

Slide 16

Lessons that we can gain from government value control approaches Price assumes an exceptionally significant part in our economy. Controlling cost may diminish showcase proficiency and may miss the approach aims. Elective government arrangements.

Slide 17

Tax

Slide 18

Content Tax on purchaser side Tax on dealer side Applications

Slide 19

Importance of duty Tax rate: circulation of expense When another assessment is forced, who will pay it? What's the market results?

Slide 20

When A New Tax Is Imposed on Buyers Tax on Cigarettes

Slide 21

Step one Tax move request bend? Step two How request bend shifts? Step three Compare two balances

Slide 22

Implications If the administration exacts an expense on purchasers Taxes diminish amount of good sold Buyers and merchants share the weight of duties Elasticity and assessment on purchasers

Slide 23

When A New Tax Is Imposed on Sellers Taxes on oil organizations BP took in 250 billion income a year ago

Slide 24

Step one A duty will move supply bend? Step two How? Step three Compare two balances

Slide 25

Implications If the administration collects another duty on venders another expense will dishearten showcase exercises, diminishing amount of products sold. Dealers and purchasers share the weight of duties Elasticity and assessment on merchants

SPONSORS