More Related Content Similar to 101 lecture 6 supply demand and government Similar to 101 lecture 6 supply demand and government (20) More from Gale Pooley (20) 101 lecture 6 supply demand and government4. 100
90
80
70
60
50
40
30
20
10
0
Supply
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
5. 10 Questions
1. What is the equilibrium price?
2. What is the equilibrium quantity?
3. If the market price was 80, how many pizzas would be
sold?
4. If the market price was 30, how many pizza would be
sold?
5. If the market price was 80, would there be a shortage,
surplus, or equilibrium?
6. If the market price was 30, would there be a shortage,
surplus, or equilibrium?
7. What would be the quantity demanded at a price of 80?
8. What would be the quantity supplied at a price of 80?
9. What would be the quantity demanded at a price of 30?
12. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
0 1 2 3 4 5 6 7 8 9 10
QD = QS
13. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
5 - 5
0 1 2 3 4 5 6 7 8 9 10
QD = QS
14. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
5 - 5
0 1 2 3 4 5 6 7 8 9 10
QD = QS
No Shortage
No Surplus
25. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
8 - 2
0 1 2 3 4 5 6 7 8 9 10
QD QS
26. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
8 - 2
Surplus of 6
0 1 2 3 4 5 6 7 8 9 10
QD QS
38. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
3 - 7
0 1 2 3 4 5 6 7 8 9 10
QS QD
39. Price
Supply
Demand
Quantity
100
90
80
70
60
50
40
30
20
10
0
QS - QD
3 - 7
Shortage of 4
0 1 2 3 4 5 6 7 8 9 10
QS QD
40. 10 Questions
1. What is the equilibrium price? 50
2. What is the equilibrium quantity? 5
3. If the market price was 80, how many pizzas would be sold? 2
4. If the market price was 30, how many pizza would be sold? 3
5. If the market price was 80, would there be a shortage, surplus,
or equilibrium? surplus
6. If the market price was 30, would there be a shortage, surplus,
or equilibrium? shortage
7. What would be the quantity demanded at a price of 80? 2
8. What would be the quantity supplied at a price of 80? 8
9. What would be the quantity demanded at a price of 30? 7
10. What would be the quantity supplied at a price of 30? 3
42. Tax Liability
Who is legally responsible to
pay the tax to the
government
Tax Incidence
43. Tax Liability
Who is legally responsible to
pay the tax to the
government
Tax Incidence
Who actually pays the tax
44. Just because I have the Tax Liability
does not mean that I have the
Tax Incidence
45. 100
90
80
70
60
50
40
30
20
10
0
Supply
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Demand
46. Pizza Tax Questions
1. What is the equilibrium price before the tax?
2. What is the equilibrium quantity?
3. If the tax is 20 SAR, what will be the new price?
4. If the tax is 20 SAR, how many pizza would be sold?
5. What will be the total revenue with the new tax?
6. How much tax will the seller pay?
7. How much tax will the buyer pay?
8. How much will the total tax be?
9. How much did the seller earn after paying the tax?
10. Why isn’t the new price 70?
47. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
48. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
49. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
50. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
51. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
52. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
53. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
54. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Tax on Supplier of 20
Shift the curve up by 20
55. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Tax on Supplier of 20
Shift the curve up by 20
56. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Tax on Supplier of 20
Shift the curve up by 20
57. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Tax on Supplier of 20
Shift the curve up by 20
58. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Tax on Supplier of 20
Shift the curve up by 20
59. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
60. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
61. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
62. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
63. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
64. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
65. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
66. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
67. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
68. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
69. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Seller Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
70. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Taxes
of 20
Seller Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
71. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Taxes
of 20
Seller Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
72. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Taxes
of 20
Seller Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
73. 100
90
80
70
60
50
40
30
20
10
0
Demand
0 1 2 3 4 5 6 7 8 9 10
Price
Quantity
Pizza Tax
Buyer Price
Taxes
of 20
Seller Price
Supply
no tax
Supply
with tax
Tax on Supplier of 20
Shift the curve up by 20
74. Taxes
• Taxes discourage market activity
• Value creation is reduced
• Buyers and sellers share the burden
• Buyers pay more, sellers receive less