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how do price ceilings affect market outcomes?
If price ceiling is above equilibrium, the ceiling has no effect on price or quantity sold
It is not binding
If price ceiling is below equilibrium, the ceiling is a binding constraint on the market
Market price must be the ceiling price – creates a shortage
how does price floor affect market outcomes?
When equilibrium price is above price floor, nothing happens
It is not binding – market forces move economy towards equilibrium and the price floor has no effect
When equilibrium price is below price floor, it causes a surplus
It is binding – market wants to move towards equilibrium, but it can’t and people don’t want to pay for the product at a higher price
how do taxes on sellers affect market outcome?
the supply curve shifts to the left (or upwards) by the exact size of the tax
Taxes discourage market activity. When a good is taxed, the quantity sold is smaller in the new equilibrium.
Buyers and sellers share the tax burden. In the new equilibrium, buyers pay more, and sellers receive less.
how do taxes on buyers affect market outcomes
demand curve shifts to the left (or downwards) by the exact size of the tax
Taxes on sellers and taxes on buyers are equivalent
Regardless of whether the tax is levied on buyers or sellers, the wedge remains the same.
The only difference between a tax on sellers and a tax on buyers is who sends the money to the government.
how does a tax burden fall?
a tax burden falls more heavily on the side of the market that is less elastic
Note 
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