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CHAPTER6SUPPLY,DEMAND,ANDGOVERNMENTPOLICIESTRUE/FALSE1ECONOMICPOLICIESOFTENHAVEEFFECTSTHATTHEIRARCHITECTSDIDNOTINTENDORANTICIPATEANSTDIF1REF60NATANALYTICLOCTHESTUDYOFECONOMICSANDDEFINITIONSOFECONOMICSTOPPUBLICPOLICYMSCDEFINITIONAL2RENTCONTROLLAWSDICTATEAMINIMUMRENTTHATLANDLORDSMAYCHARGETENANTSANSFDIF1REF60NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCDEFINITIONAL3MINIMUMWAGELAWSDICTATETHELOWESTWAGETHATFIRMSMAYPAYWORKERSANSTDIF1REF60NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL4PRICECONTROLSAREUSUALLYENACTEDWHENPOLICYMAKERSBELIEVETHATTHEMARKETPRICEOFAGOODORSERVICEISUNFAIRTOBUYERSORSELLERSANSTDIF1REF60NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECONTROLSMSCDEFINITIONAL5PRICECONTROLSCANGENERATEINEQUITIESANSTDIF1REF60NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECONTROLSMSCDEFINITIONAL6POLICYMAKERSUSETAXESTORAISEREVENUEFORPUBLICPURPOSESANDTOINFLUENCEMARKETOUTCOMESANSTDIF1REF60NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCDEFINITIONAL7IFAGOODORSERVICEISSOLDINACOMPETITIVEMARKETFREEOFGOVERNMENTREGULATION,THENTHEPRICEOFTHEGOODORSERVICEADJUSTSTOBALANCESUPPLYANDDEMANDANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICESMSCDEFINITIONAL8ATTHEEQUILIBRIUMPRICE,THEQUANTITYTHATBUYERSWANTTOBUYEXACTLYEQUALSTHEQUANTITYTHATSELLERSWANTTOSELLANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICESMSCDEFINITIONAL9APRICECEILINGISALEGALMINIMUMONTHEPRICEATWHICHAGOODORSERVICECANBESOLDANSFDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCDEFINITIONAL10APRICECEILINGSETABOVETHEEQUILIBRIUMPRICEISNOTBINDINGANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE11IFAPRICECEILINGISNOTBINDING,THENITWILLHAVENOEFFECTONTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE12TOBEBINDING,APRICECEILINGMUSTBESETABOVETHEEQUILIBRIUMPRICEANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE13APRICECEILINGSETBELOWTHEEQUILIBRIUMPRICEISBINDINGANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE14APRICECEILINGSETBELOWTHEEQUILIBRIUMPRICECAUSESQUANTITYDEMANDEDTOEXCEEDQUANTITYSUPPLIEDANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCINTERPRETIVE15APRICECEILINGSETABOVETHEEQUILIBRIUMPRICECAUSESQUANTITYDEMANDEDTOEXCEEDQUANTITYSUPPLIEDANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE16ABINDINGPRICECEILINGCAUSESQUANTITYDEMANDEDTOBELESSTHANQUANTITYSUPPLIEDANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCINTERPRETIVE17APRICECEILINGSETBELOWTHEEQUILIBRIUMPRICECAUSESASHORTAGEINTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCINTERPRETIVE18APRICECEILINGSETABOVETHEEQUILIBRIUMPRICECAUSESASURPLUSINTHEMARKETANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE19ABINDINGPRICECEILINGCAUSESASHORTAGEINTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCINTERPRETIVE20WHENABINDINGPRICECEILINGISIMPOSEDONAMARKETFORAGOOD,SOMEPEOPLEWHOWANTTOBUYTHEGOODCANNOTDOSOANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCINTERPRETIVE21LONGLINESANDDISCRIMINATIONAREEXAMPLESOFRATIONINGMETHODSTHATMAYNATURALLYDEVELOPINRESPONSETOABINDINGPRICECEILINGANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE22PRICECEILINGSARETYPICALLYIMPOSEDTOBENEFITBUYERSANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE23BINDINGPRICECEILINGSBENEFITCONSUMERSBECAUSETHEYALLOWCONSUMERSTOBUYALLTHEGOODSTHEYDEMANDATALOWERPRICEANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE24ALLBUYERSBENEFITFROMABINDINGPRICECEILINGANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE25ABINDINGPRICECEILINGMAYNOTHELPALLCONSUMERS,BUTITDOESNOTHURTANYCONSUMERSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE26WHENTHEGOVERNMENTIMPOSESABINDINGPRICECEILINGONACOMPETITIVEMARKET,ASURPLUSOFTHEGOODARISES,ANDSELLERSMUSTRATIONTHESCARCEGOODSAMONGTHELARGENUMBEROFPOTENTIALBUYERSANSFDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|SHORTAGESMSCDEFINITIONAL27THERATIONINGMECHANISMSTHATDEVELOPUNDERBINDINGPRICECEILINGSAREUSUALLYINEFFICIENTANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGS|EFFICIENCYMSCINTERPRETIVE28PRICEISTHERATIONINGMECHANISMINAFREE,COMPETITIVEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICESMSCINTERPRETIVE29PRICESAREINEFFICIENTRATIONINGDEVICESANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICES|EFFICIENCYMSCINTERPRETIVE30WHENFREEMARKETSRATIONGOODSWITHPRICES,ITISBOTHEFFICIENTANDIMPERSONALANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICES|EFFICIENCYMSCINTERPRETIVE31WHENAFREEMARKETFORAGOODREACHESEQUILIBRIUM,ANYONEWHOISWILLINGANDABLETOPAYTHEMARKETPRICECANBUYTHEGOODANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICESMSCINTERPRETIVE32IFAPRICECEILINGOF2PERGALLONISIMPOSEDONGASOLINE,ANDTHEMARKETEQUILIBRIUMPRICEIS150,THENTHEPRICECEILINGISABINDINGCONSTRAINTONTHEMARKETANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCAPPLICATIVE33IFAPRICECEILINGOF150PERGALLONISIMPOSEDONGASOLINE,ANDTHEMARKETEQUILIBRIUMPRICEIS2,THENTHEPRICECEILINGISABINDINGCONSTRAINTONTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCAPPLICATIVE34APRICECEILINGCAUSEDTHEGASOLINESHORTAGEOF1973INTHEUNITEDSTATESANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCINTERPRETIVE35ONECOMMONEXAMPLEOFAPRICECEILINGISRENTCONTROLANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCDEFINITIONAL36THEGOALOFRENTCONTROLISTOHELPTHEPOORBYMAKINGHOUSINGMOREAFFORDABLEANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCDEFINITIONAL37ECONOMISTSARGUETHATRENTCONTROLISAHIGHLYEFFICIENTWAYTOHELPTHEPOORRAISETHEIRSTANDARDOFLIVINGANSFDIF2REF61NATANALYTICLOCTHESTUDYOFECONOMICSANDDEFINITIONSOFECONOMICSTOPECONOMISTS|RENTCONTROLMSCINTERPRETIVE38BECAUSESUPPLYANDDEMANDAREINELASTICINTHESHORTRUN,THEINITIALSHORTAGECAUSEDBYRENTCONTROLISLARGEANSFDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROL|ELASTICITYMSCDEFINITIONAL39THEPRIMARYEFFECTOFRENTCONTROLINTHESHORTRUNISTOREDUCERENTSANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCDEFINITIONAL40THEHOUSINGSHORTAGESCAUSEDBYRENTCONTROLARELARGERINTHELONGRUNTHANINTHESHORTRUNBECAUSEBOTHTHESUPPLYOFHOUSINGANDTHEDEMANDFORHOUSINGAREMOREELASTICINTHELONGRUNANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROL|ELASTICITYMSCINTERPRETIVE41THEEFFECTSOFRENTCONTROLINTHELONGRUNINCLUDELOWERRENTSANDLOWERQUALITYHOUSINGANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCINTERPRETIVE42RENTCONTROLMAYLEADTOLOWERRENTSFORTHOSEWHOFINDHOUSING,BUTTHEQUALITYOFTHEHOUSINGMAYALSOBELOWERANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCINTERPRETIVE43INAFREEMARKET,THEPRICEOFHOUSINGADJUSTSTOELIMINATETHESHORTAGESTHATGIVERISETOUNDESIRABLELANDLORDBEHAVIORANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPRENTCONTROLMSCDEFINITIONAL44APRICEFLOORISALEGALMINIMUMONTHEPRICEATWHICHAGOODORSERVICECANBESOLDANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCDEFINITIONAL45APRICEFLOORSETABOVETHEEQUILIBRIUMPRICEISNOTBINDINGANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE46IFAPRICEFLOORISNOTBINDING,THENITWILLHAVENOEFFECTONTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE47TOBEBINDING,APRICEFLOORMUSTBESETABOVETHEEQUILIBRIUMPRICEANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE48APRICEFLOORSETBELOWTHEEQUILIBRIUMPRICEISBINDINGANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE49APRICEFLOORSETBELOWTHEEQUILIBRIUMPRICECAUSESQUANTITYSUPPLIEDTOEXCEEDQUANTITYDEMANDEDANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE50APRICEFLOORSETABOVETHEEQUILIBRIUMPRICECAUSESQUANTITYSUPPLIEDTOEXCEEDQUANTITYDEMANDEDANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|SURPLUSESMSCINTERPRETIVE51ABINDINGPRICEFLOORCAUSESQUANTITYSUPPLIEDTOBELESSTHANQUANTITYDEMANDEDANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|SURPLUSESMSCINTERPRETIVE52APRICEFLOORSETBELOWTHEEQUILIBRIUMPRICECAUSESASURPLUSINTHEMARKETANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE53APRICEFLOORSETABOVETHEEQUILIBRIUMPRICECAUSESASURPLUSINTHEMARKETANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|SURPLUSESMSCINTERPRETIVE54ABINDINGPRICEFLOORCAUSESASHORTAGEINTHEMARKETANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|SURPLUSESMSCINTERPRETIVE55WHENABINDINGPRICEFLOORISIMPOSEDONAMARKETFORAGOOD,SOMEPEOPLEWHOWANTTOSELLTHEGOODCANNOTDOSOANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|SURPLUSESMSCINTERPRETIVE56DISCRIMINATIONISANEXAMPLEOFARATIONINGMECHANISMTHATMAYNATURALLYDEVELOPINRESPONSETOABINDINGPRICEFLOORANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE57PRICEFLOORSARETYPICALLYIMPOSEDTOBENEFITBUYERSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE58BINDINGPRICEFLOORSBENEFITSELLERSBECAUSETHEYALLOWSELLERSTOSELLALLTHEGOODSTHEYWANTATAHIGHERPRICEANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE59NOTALLSELLERSBENEFITFROMABINDINGPRICEFLOORANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE60ABINDINGPRICEFLOORMAYNOTHELPALLSELLERS,BUTITDOESNOTHURTANYSELLERSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCINTERPRETIVE61THERATIONINGMECHANISMSTHATDEVELOPUNDERBINDINGPRICEFLOORSAREUSUALLYEFFICIENTANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORS|EFFICIENCYMSCINTERPRETIVE62WHENAFREEMARKETFORAGOODREACHESEQUILIBRIUM,ANYONEWHOISWILLINGANDABLETOSELLATTHEMARKETPRICECANSELLTHEGOODANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICESMSCINTERPRETIVE63IFTHEEQUILIBRIUMPRICEOFANAIRLINETICKETIS400ANDTHEGOVERNMENTIMPOSESAPRICEFLOOROF500ONAIRLINETICKETS,THENFEWERAIRLINETICKETSWILLBESOLDTHANATTHEMARKETEQUILIBRIUMANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCAPPLICATIVE64IFTHEEQUILIBRIUMPRICEOFANAIRLINETICKETIS500ANDTHEGOVERNMENTIMPOSESAPRICEFLOOROF400ONAIRLINETICKETS,THENFEWERAIRLINETICKETSWILLBESOLDTHANATTHEMARKETEQUILIBRIUMANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCAPPLICATIVE65ONECOMMONEXAMPLEOFAPRICEFLOORISTHEMINIMUMWAGEANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL66THEGOALOFTHEMINIMUMWAGEISTOENSUREWORKERSAMINIMALLYADEQUATESTANDARDOFLIVINGANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL67THEUNITEDSTATESISTHEONLYCOUNTRYINTHEWORLDWITHMINIMUMWAGELAWSANSFDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCINTERPRETIVE68STATESINTHEUSMAYMANDATEMINIMUMWAGESABOVETHEFEDERALLEVELANSTDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCINTERPRETIVE69INTHELABORMARKETS,WORKERSDETERMINETHESUPPLYOFLABORANDFIRMSDETERMINETHEDEMANDANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPLABORDEMAND|LABORSUPPLYMSCDEFINITIONAL70INANUNREGULATEDLABORMARKET,THEWAGEADJUSTSTOBALANCELABORSUPPLYANDLABORDEMANDANSTDIF2REF61NATANALYTICLOCLABORMARKETSTOPWAGESMSCINTERPRETIVE71ABINDINGMINIMUMWAGECAUSESTHEQUANTITYOFLABORDEMANDEDTOEXCEEDTHEQUANTITYOFLABORSUPPLIEDANSFDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCINTERPRETIVE72ABINDINGMINIMUMWAGECREATESUNEMPLOYMENTANSTDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGE|UNEMPLOYMENTMSCINTERPRETIVE73ABINDINGMINIMUMWAGEMAYNOTHELPALLWORKERS,BUTITDOESNOTHURTANYWORKERSANSFDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCINTERPRETIVE74ABINDINGMINIMUMWAGERAISESTHEINCOMESOFTHOSEWORKERSWHOHAVEJOBS,BUTITLOWERSTHEINCOMESOFWORKERSWHOCANNOTFINDJOBSANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL75THEECONOMYCONTAINSMANYLABORMARKETSFORDIFFERENTTYPESOFWORKERSANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPLABORMARKETSMSCDEFINITIONAL76THEIMPACTOFTHEMINIMUMWAGEDEPENDSONTHESKILLANDEXPERIENCEOFTHEWORKERANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL77WORKERSWITHHIGHSKILLSANDMUCHEXPERIENCEARENOTTYPICALLYAFFECTEDBYTHEMINIMUMWAGEANSTDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCINTERPRETIVE78THEMINIMUMWAGEHASITSGREATESTIMPACTONTHEMARKETFORTEENAGELABORANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL79THEMINIMUMWAGEISMOREOFTENBINDINGFORTEENAGERSTHANFOROTHERMEMBERSOFTHELABORFORCEANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL80STUDIESBYECONOMISTSHAVEFOUNDTHATA10PERCENTINCREASEINTHEMINIMUMWAGEDECREASESTEENAGEEMPLOYMENT10PERCENTANSFDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL81ALARGEMAJORITYOFECONOMISTSFAVORELIMINATINGTHEMINIMUMWAGEANSFDIF2REF61NATANALYTICLOCLABORMARKETSTOPECONOMISTS|MINIMUMWAGEMSCINTERPRETIVE82ADVOCATESOFTHEMINIMUMWAGEADMITTHATITHASSOMEADVERSEEFFECTS,BUTTHEYBELIEVETHATTHESEEFFECTSARESMALLANDTHATAHIGHERMINIMUMWAGEMAKESTHEPOORBETTEROFFANSTDIF1REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCDEFINITIONAL83IFTHEEQUILIBRIUMWAGEIS4PERHOURANDTHEMINIMUMWAGEIS515PERHOUR,THENASHORTAGEOFLABORWILLEXISTANSFDIF2REF61NATANALYTICLOCLABORMARKETSTOPMINIMUMWAGEMSCAPPLICATIVEFIGURE617DS102030405060708090100QUANTITY102030405060708090100PRICE84REFERTOFIGURE617APRICECEILINGSETAT30WOULDRESULTINASHORTAGEOF20UNITSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCAPPLICATIVE85REFERTOFIGURE617APRICECEILINGSETAT70WOULDRESULTINASHORTAGEOF40UNITSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECEILINGSMSCAPPLICATIVE86REFERTOFIGURE617APRICEFLOORSETAT60WOULDRESULTINASURPLUSOF20UNITSANSTDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCAPPLICATIVE87REFERTOFIGURE617APRICEFLOORSETAT40WOULDRESULTINASURPLUSOF20UNITSANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICEFLOORSMSCAPPLICATIVE88MOSTECONOMISTSAREINFAVOROFPRICECONTROLSASAWAYOFALLOCATINGRESOURCESINTHEECONOMYANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPECONOMISTS|PRICECONTROLSMSCINTERPRETIVE89WHENPOLICYMAKERSSETPRICESBYLEGALDECREE,THEYOBSCURETHESIGNALSTHATNORMALLYGUIDETHEALLOCATIONOFSOCIETYSRESOURCESANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECONTROLSMSCDEFINITIONAL90PRICECONTROLSOFTENHURTTHOSETHEYARETRYINGTOHELPANSTDIF1REF61NATANALYTICLOCSUPPLYANDDEMANDTOPPRICECONTROLSMSCDEFINITIONAL91RENTSUBSIDIESANDWAGESUBSIDIESAREBETTERTHANPRICECONTROLSATHELPINGTHEPOORBECAUSETHEYHAVENOCOSTSASSOCIATEDWITHTHEMANSFDIF2REF61NATANALYTICLOCSUPPLYANDDEMANDTOPSUBSIDIESMSCINTERPRETIVE92THETERMTAXINCIDENCEREFERSTOHOWTHEBURDENOFATAXISDISTRIBUTEDAMONGTHEVARIOUSPEOPLEWHOMAKEUPTHEECONOMYANSTDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCDEFINITIONAL93ATAXONSELLERSSHIFTSTHESUPPLYCURVEBUTNOTTHEDEMANDCURVEANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE94ATAXONSELLERSSHIFTSTHESUPPLYCURVETOTHELEFTANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE95ATAXONSELLERSINCREASESSUPPLYANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE96ATAXONSELLERSANDANINCREASEININPUTPRICESAFFECTTHESUPPLYCURVEINTHESAMEWAYANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE97ATAXOF1ONSELLERSSHIFTSTHESUPPLYCURVEUPWARDBYEXACTLY1ANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCAPPLICATIVE98ATAXOF1ONSELLERSALWAYSINCREASESTHEEQUILIBRIUMPRICEBY1ANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCAPPLICATIVE99ATAXONSELLERSREDUCESTHESIZEOFAMARKETANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE100ATAXONSELLERSINCREASESTHEQUANTITYOFTHEGOODSOLDINTHEMARKETANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE101IFATAXISIMPOSEDONTHESELLERSOFAPRODUCT,THENTHETAXBURDENWILLFALLENTIRELYONTHESELLERSANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCINTERPRETIVE102ATAXONSELLERSUSUALLYCAUSESBUYERSTOPAYMORETHEGOODANDSELLERSTORECEIVELESSFORTHEGOODTHANTHEYDIDBEFORETHETAXWASLEVIEDANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE103ATAXONBUYERSSHIFTSTHEDEMANDCURVEANDTHESUPPLYCURVEANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE104ATAXONBUYERSSHIFTSTHEDEMANDCURVETOTHERIGHTANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE105ATAXONBUYERSDECREASESDEMANDANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE106ATAXOF1ONBUYERSSHIFTSTHEDEMANDCURVEDOWNWARDBYEXACTLY1ANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCAPPLICATIVE107ATAXOF1ONBUYERSALWAYSDECREASESTHEEQUILIBRIUMPRICEBY1ANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCAPPLICATIVE108ATAXONBUYERSINCREASESTHESIZEOFAMARKETANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE109ATAXONBUYERSDECREASESTHEQUANTITYOFTHEGOODSOLDINTHEMARKETANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE110IFATAXISIMPOSEDONTHEBUYERSOFAPRODUCT,THENTHETAXBURDENWILLFALLENTIRELYONTHEBUYERSANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCINTERPRETIVE111ATAXONBUYERSUSUALLYCAUSESBUYERSTOPAYMORETHEGOODANDSELLERSTORECEIVELESSFORTHEGOODTHANTHEYDIDBEFORETHETAXWASLEVIEDANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCINTERPRETIVE112WHETHERATAXISLEVIEDONSELLERSORBUYERS,TAXESDISCOURAGEMARKETACTIVITYANSTDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCDEFINITIONAL113WHETHERATAXISLEVIEDONSELLERSORBUYERS,TAXESENCOURAGEMARKETACTIVITYANSFDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCDEFINITIONAL114WHETHERATAXISLEVIEDONSELLERSORBUYERS,BUYERSANDSELLERSUSUALLYSHARETHEBURDENOFTAXESANSTDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCDEFINITIONAL115TAXESLEVIEDONSELLERSANDTAXESLEVIEDONBUYERSAREEQUIVALENTANSTDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCDEFINITIONAL116THEWEDGEBETWEENTHEBUYERSPRICEANDTHESELLERSPRICEISTHESAME,REGARDLESSOFWHETHERTHETAXISLEVIEDONBUYERSORSELLERSANSTDIF1REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCDEFINITIONAL117THETAXINCIDENCEDEPENDSONWHETHERTHETAXISLEVIEDONBUYERSORSELLERSANSFDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCINTERPRETIVE118LAWMAKERSCANDECIDEWHETHERTHEBUYERSORTHESELLERSMUSTSENDATAXTOTHEGOVERNMENT,BUTTHEYCANNOTLEGISLATETHETRUEBURDENOFATAXANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXINCIDENCEMSCINTERPRETIVE119ATAXONGOLFCLUBSWILLCAUSEBUYERSOFGOLFCLUBSTOPAYAHIGHERPRICE,SELLERSOFGOLFCLUBSTORECEIVEALOWERPRICE,ANDFEWERGOLFCLUBSTOBESOLDANSTDIF2REF62NATANALYTICLOCSUPPLYANDDEMANDTOPTAXESMSCAPPLICATIVE120FICAISANEXAMPLEOFAPAYROLLTAX,WHICHISATAXONTHEWAGESTHATFIRMSPAYTHEIRWORKERSANSTDIF1REF62NATANALYTICLOCLABORMARKETSTOPFICATAXMSCDEFINITIONAL121SINCEHALFOFTHEFICATAXISPAIDBYFIRMSANDTHEOT
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