Copyright © 2011 Cengage Learning 6 Supply, Demand, and Government Policies

Figure 1 A Market with a Price Ceiling (1) (a) A price ceiling that is not binding Quantity of ice cream cornets 0 Price of ice cream cornet Equilibrium quantity €4€4 Price ceiling Equilibrium price Demand Supply Copyright © 2011 Cengage Learning

Figure 1 A Market with a Price Ceiling (2) (b) A price ceiling that is binding Quantity of ice cream cornets 0 Price of ice cream cornet Demand Supply 2Price ceiling Shortage 75 Quantity supplied 125 Quantity demanded Equilibrium price €3€3 Copyright © 2011 Cengage Learning

Figure 2 Rent Control in the Short Run and in the Long Run (1) (a) Rent control in the short run (supply and demand are inelastic) Quantity of apartments 0 Supply Controlled rent Rental price of apartment Demand Shortage Copyright © 2011 Cengage Learning

Figure 2 Rent Control in the Short Run and in the Long Run (2) (b) Rent control in the long run (supply and demand are elastic) 0 Rental price of housing unit Quantity of housing units Demand Supply Controlled rent Shortage Copyright © 2011 Cengage Learning

Figure 3 A Market with a Price Floor (1) (a) A Price Floor That Is Not Binding Quantity of ice cream cornets 0 Price of ice cream cornet Equilibrium quantity 2 Price floor Equilibrium price Demand Supply €3€3 100 Copyright © 2011 Cengage Learning

Figure 3 A Market with a Price Floor (2) (b) A price floor that is binding Quantity of ice cream cornets 0 Price of ice cream cornet Demand Supply €4€4 Price floor 80 Quantity demanded 120 Quantity supplied Equilibrium price Surplus 3 Copyright © 2011 Cengage Learning

Figure 4 How the Minimum Wage Affects the Labour Market (1) Quantity of labour Wage 0 labour demand labour Supply Equilibrium employment Equilibrium wage Copyright © 2011 Cengage Learning

Figure 4 How the Minimum Wage Affects the Labour Market (2) Quantity of labour Wage 0 labour Supply Labour surplus (unemployment) Labour demand Minimum wage Quantity demanded Quantity supplied Copyright © 2011 Cengage Learning

Copyright © 2010 Cengage Learning Figure 4 How the Minimum Wage Affects the Labour Market (3) Copyright © 2011 Cengage Learning

Copyright © 2010 Cengage Learning Figure 4 How the Minimum Wage Affects the Labour Market (4) Copyright © 2011 Cengage Learning

Figure 5 A Tax on Sellers 2.80 Quantity of ice cream cornets 0 Price of ice cream cornet Price without tax Price sellers receive Equilibrium with tax Equilibrium without tax Tax (€0.50) Price buyers pay S1S1 S2S2 Demand,D1D1 A tax on sellers shifts the supply curve upward by the amount of the tax (€0.50) € Copyright © 2011 Cengage Learning

Figure 6 A Payroll Tax Quantity of labour 0 Wage Labour demand Labour supply Tax wedge Wage workers receive Wage firms pay Wage without tax Copyright © 2011 Cengage Learning

Figure 7 How the Burden of a Tax Is Divided (1) Quantity 0 Price Demand Supply Tax Price sellers receive Price buyers pay (a) Elastic supply, inelastic demand the incidence of the tax falls more heavily on consumers When supply is more elastic than demand... Price without tax than on producers. Copyright © 2011 Cengage Learning

Figure 7 How the Burden of a Tax Is Divided (2) Quantity 0 Price Demand Supply Tax Price sellers receive Price buyers pay (b) Inelastic supply, elastic demand than on consumers. 1. When demand is more elastic than supply... Price without tax the incidence of the tax falls more heavily on producers... Copyright © 2011 Cengage Learning

Copyright © 2010 Cengage Learning Figure 8 A Subsidy on Rail Transport Copyright © 2011 Cengage Learning