Market failure notebook

http://imgur.com/a/H1c5Q

Market failure

http://imgur.com/Z24ZC,ABxnL#1

EMI 14 and 16

EMI14
1. direct taxes- taxes the individual pay the government directly.
indirect taxes- taxes collected by the supplier
specific taxes- a tax that adds a specific amount of tax onto the product price.
ad valorem tax- a tax that add a percentage onto the price of the good.
subsidies- a payment made by the government to the firms to reduce costs of production in order to allow them to lower their prices.
2. in book
3. in book
EMI 16
price ceiling- a price set below the equlibrium price intended to help consumers.
price floor- a price set above the equilibrium price in order to guarntee an income for the producer.
quota- is the minimum sales goal for a set time span.
buffer stock scheme- is an attempt to use commodity storage for the purposes of stabilising prices in an entire economy or, more commonly, an individual (commodity) market.
2. a. they will sell tickets below the equilibrium price to fill up all the seats.
b. in order to have affordable housing there is rent control.
c. medical care has a price ceiling so people can afford it.
d. fuel has a price ceiling so that everyone can afford it.
3. milk and eggs are higher calorie and more luxury goods then rice and wheet also they are more expensive to produce therefore to keep the producers making money but also so that they are more equally spread to the public.
4. look in book

Indirect taxes and subsidies

Indirect taxes and subsidies
Effect on an indirext tax on the demand for and supply of a product Indirect tax- one imposed upon expedenture. it is put on the selling price of a product because of this tax less products will be made
A specific tax-
A fixed add on to a price so s+1
A percentage tax- this is where the tax is a percentage of the selling proce so as the price of something goes up so does the tax.
Producers revenue




Government tax revenue
Government gets new taxes





Tax burden
The burden is on both of them





Price elasticity
Demand is elastic and supply is inelastic
However as the price goes up demand falls.
So the suppliers have to carry most of the burden




Demand is inelastic and supply is elastic.



Rules-
Where the value of ped is equal to the value of pes for a product then the burden of any tax imposed will be shared equally.
PED Value is greater- greater on the producer
PED value is less- greater on the consumer
So taxes are placed on cigs and booze
The effect of a subsidy on the demand for and supply of a product. A subsidy is an amount of money paid to a firm by the government per unit of income

To lower the price of essential goods

To guarantee products that the governemnt thinks are necessary

To enable producers to compete with overseas trade








Subsidys-
Opportunity cost-
Will the subsidy make companies inefficient
Who is paying the taxes
What damage will it do to companies ofshore who are not recivieng subsidies.