Lecture_4_

Page 1: Introduction

• Content Overview

  • Topics such as taste, tea quality, and certifications including Rainforest Alliance Certified are mentioned.

• Key Concepts

  • Exploration of how taxes affect consumer behavior.

Page 2: Government and the Market

• Introduction to Price Control

  • Overview of government intervention in market price mechanisms.

Page 3: Price Control

• Equilibrium Price

  • Definition: The price level where supply equals demand, creating market stability without shortages or surpluses.

• Minimum Prices

  • Definition and justification for implementing minimum prices.

  • Discussion of potential effects on markets.

Page 4: Minimum Price Illustration

• Graph Analysis

  • Schematic representation of supply (S1) and demand (D1) at equilibrium price (Pe).

  • Quantity supplied (Qs1) vs. quantity demanded (Qd) resulting in surplus.

  • Explanation of minimum prices as a price floor.

Page 5: Extended Price Control Considerations

• Revisit Equilibrium Price

  • Must consider the effects on market shortages or surpluses due to price controls and minimum pricing.

• Cost to Government

  • Potential financial burden associated with maintaining minimum prices.

Page 6: Government Cost Considerations

• Graphical Analysis

  • Evaluation of costs in relation to minimum price structure, illustrating the economic implications of government interventions.

Page 7: Managing Market Surpluses

• Dealing with Surpluses

  • Suggested strategies to handle surpluses caused by minimum pricing.

• Minimum Unit Pricing

  • Specific example related to alcohol pricing structures.

Page 8: Minimum Pricing vs. Higher Taxes

• Comparison of minimum unit pricing strategy against higher tax implications.

Page 9: Maximum Prices Overview

• Introduction to Maximum Prices

  • Justification and effects of implementing price ceilings in markets.

Page 10: Graphical Overview of Maximum Prices

• Visual Representation

  • Supply and demand curves demonstrating the impact of price ceilings leading to shortages.

Page 11: Managing Shortages

• Strategic Approaches

  • Various methods for controlling supply shortages including rationing and customer prioritization techniques.

Page 12: Effect of Price Control on Underground Markets

• Market Reactions

  • Analysis of how lawful price controls can influence black market pricing dynamics.

Page 13: Impact on Underground Prices

• Illustration of Price Effects

  • Further exploration of how price controls affecting dealer behavior can shift underground market equilibrium.

Page 14: Government Taxation Overview

• Indirect Taxes and Subsidies

  • Discussion on how these affect market dynamics and supply levels.

Page 15: Tax Types and Effects

• Specific vs. Ad Valorem Taxes

  • Explanation of how each type impacts supply curves.

Page 16: Specific Tax Effect on Supply Curve

• Illustration of Tax Impact

  • Specific taxes shift the supply curve upwards reflecting increased production costs.

Page 17: Ad Valorem Tax Impact on Supply Curve

• Graphical Representation

  • Visualizing the upward shift in the supply curve due to ad valorem taxation.

Page 18: Comprehensive Tax Effects

• Interactions with Price and Quantity

  • Effects on overall market dynamics due to imposed taxes on goods.

Page 19: Price and Quantity After Taxation

• Market Changes

  • Analysis of how taxes shift prices and quantities leading to new equilibrium points.

Page 20: New Equilibrium Dynamics

• Illustrative Analysis

  • Understanding the shifts in price (from P1 to P2) following a tax.

Page 21: Tax Incidence Analysis

• Elasticity Impact

  • Different tax burdens across varying elasticities of demand and supply.

Page 22: Tax Incidence: Inelastic Demand

• Graphical Analysis

  • How inelastic demand affects the burden shared between producers and consumers.

Page 23: Continuation of Tax Incidence Analysis

• Inelastic Demand Insights

  • Further breakdown on how price adjustments impact demand under inelastic conditions.

Page 24: Consumers’ and Producers’ Share

• Tax Incidence Breakdown

  • Analyzing share distribution between consumers and producers under tax conditions for inelastic demand.

Page 25: Tax Incidence: Elastic Demand

• Elastic Demand Influence

  • Impact of price adjustments on consumer burden and supplier responses under elastic conditions.

Page 26: Elastic Demand Continued

• Graphical Insights

  • Analyzing further effects of taxation on price and demand elasticity relationships.

Page 27: Elastic Demand Analysis Continued

• Consumer Burden Evaluation

  • Exploring how changing prices alter consumer share under elastic demand scenarios.

Page 28: Tax Share Distribution: Elastic Demand

• Final Insights on Burden Sharing

  • Complete breakdown of consumer and producer shares concerning elastic demand instances.

Page 29: Incidence and Inelastic Supply

• Supply Elasticity Views

  • Tax effects on price with an emphasis on inelastic supply conditions.

Page 30: Inelastic Supply Dynamics

• Further exploration of how supply elasticity impacts tax burdens across producers and consumers.

Page 31: Inelastic Supply Burden Sharing

• Consumer Share Analysis

  • Evaluation of tax burdens with respect to inelastic supply.

Page 32: Final Incidence Evaluation: Inelastic Supply

• Burden Breakdown

  • Analyzing consumer and producer shares in the context of inelastic supply.

Page 33: Incidence of Tax: Elastic Supply

• Overview of how supply elasticity affects overall taxation incidence.

Page 34: Elastic Supply Integrity

• Discussion on the changing price and quantity relationship in elastic supply scenarios under taxation.

Page 35: Consumer Shares under Elastic Supply

• Graphical Representation

  • Evaluate elasticity's effect on consumer share outcomes during tax implementations.

Page 36: Final Elastic Supply Overview

• Analytical breakdown of the potential share adjustments under taxation conditions.

Page 37: Summary of Indirect Taxes and Subsidies

• Consolidation of Elasticity Insights

  • Producers’ and consumers’ share variance based on elasticity perspectives for tax implications.

Page 38: Comparative Share Analysis

• Summary of how elasticity impacts share allocation between consumers and producers across various scenarios.

Page 39: Tax Policy Implications

• Discussion on policy considerations based on the incidence of taxes and elasticity interactions on market outcomes.

Page 40: Subsidies Overview

• Effects on Supply Curve

  • Examination of specific and ad valorem subsidies and their market impacts.

Page 41: Subsidy Impact on Price and Quantity

• Graphical Analysis

  • Visualizing the outcomes of subsidy implementations on supply and demand dynamics.

Page 42: Share Division in Subsidy Impact

• Producer and Consumer Evaluation

  • Breakdown of how subsidies affect market participants and the equilibrium state.

Page 43: Consolidated Subsidy Effects

• Comprehensive Overview

  • Analysis of how subsidies influence demand curve shifts and related dynamics.

Page 44: Government Rejection of Market Allocation

• Concept Overview

  • Introduction to reasons for government interventions in free market allocations.

Page 45: Providing Goods to Consumers

• Justification and Effects

  • Evaluation of government efforts to supply goods without charge and associated supply challenges.

Page 46: Demand for Healthcare Services

• Hospital Treatment Dynamics

  • How free healthcare impacts demand vs. supply balance, leading to systemic issues like waiting lists.

Page 47: Dealing with Shortages in Free Provision

• Methodological Insights

  • Different strategies employed to manage shortages in public service provision.

• Market Dynamics of Illicit Goods

  • Examination of illegal markets arising from regulatory pricing and the corresponding economic parallels.

Page 48: Illegal Market Price Dynamics

• Cost-Benefit Analysis of Regulations

  • Discusses how making products illegal may drive prices up, leading to economic inefficiencies.

Page 49: Prohibition vs. Taxation Impacts

• Comparison Framework

  • Analyzing the broader impacts on demand/supply and pricing when comparing prohibition against taxation strategies.

Page 50: Marginal Utility Theory Introduction

• Core Concepts

  • Definition of utility as satisfaction derived from goods/services; explains consumer behavior leveraging utility maximization.

Page 51: Utility Measurement and Maximization

• Understanding Utility

  • Consumers’ preferences leading to utility maximization discussed, along with implications for consumer choice theory.

Page 52: Marginal Utility Explained

• Definitions and Applications

  • Clarification of total vs. marginal utility concepts alongside diminishing marginal utility principles.

Page 53: Graphical Depiction of Utility Measurement

• Data Representation

  • Illustration of total and marginal utility curves in relation to consumer goods (e.g., packets of crisps).

Page 54: Optimal Consumption Analysis

• Consumer Surplus Evaluation

  • Discusses the maximum consumer surplus achievable under ideal consumption conditions.

Page 55: Graph on Consumer Surplus

• Explores consumer surplus distribution and total utility/maximizing consumer expenditure.

Page 56: Optimal Consumption Framework

• Key Equations

  • Provides formulas for calculating marginal and total consumer surplus, linking utility maximization to demand curves.

Page 57: Individual Demand Curve Derivation

• Graphical Development

  • Illustrates the process of deriving an individual’s demand curve from marginal utility insights.

Page 58: Continuation of Demand Curve Derivation

• Further exploration of the relationships between quantity consumed and pricing in the context of marginal utility.

Page 59: Demand Curve Derivation Analysis

• Continued examination of how to extract demand curves through variations in pricing and consumption levels.

Page 60: Diminishing Marginal Utility and Demand Curve

• Utility and Market Demand Curves

  • Talks about the application of diminishing marginal utility to the demand curve including market behavior dynamics.

Page 61: Multi-Commodity Version Limitations

• Understanding Constraints

  • Discussion of how marginal utility is affected by the consumption of multiple goods along with implications for demand curves.

Page 62: Timing Costs and Benefits

• Intertemporal Choice

  • Introduces the concept of timing in economic decisions and its effects on consumer choices.

Page 63: Measure of Impatience

• Discounting Explained

  • Discusses various methodologies to quantify impatience among consumers impacting their monetary evaluations across time intervals.

Page 64: Impatience and Consumer Behavior

• Complexities of Decision Making

  • Explores the notion of varying degrees of impatience affecting consumer behavior and planning.