Lecture 5 - Control of prices, taxes and subsidies (13/10/25)

Government and the market

D + S curve - Shortage/surplus

Max price -

Minimum wage = price ceiling

Taxes

Indirect - a tax on the expenditure of goods

Specific - fixed sum of unit sold

ad velorem tax - certain % of the price of a good

Incidence of tax: inelastic demand

Supply + tax

Consumer share - larger —> tax burden

Producers share - smaller

Elastic

Tax burden more on the producer