U2 M9 Quantity Controls

Remember when there is a quota rent situation, the price will always gravitate towards the demand curve when left of the equilibrium quantity

Quantity Control (quota)

an upper limit on the quantity of some good that can be bought or sold

Quota limit

The total amount of the good that can be legally transacted

License

gives its owner the right to supply a good

Demand Price

The price consumers will demand at that quantity

Supply Price

The price producers will supply at that quantity

If you put a quota on a quantity below equilibrium quantity

It is effective and decreased supply increases the price demanded @ the lower quantity

Quota rent

The wedge (vertical difference between price supplied vs price demanded)

Deadweight Loss (definition)

amount of transactions that would’ve happened but didn’t due to government intervention

Deadweight Loss (in terms of price)

calculate the area of the triangle forming between the quota, supply curve and demand curve

Deadweight Loss (in quantitative units)

difference between equilibrium quantity and quota quantity