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Government Intervention (Taxes (Type of taxes (Ad Valorem tax : A tax on a…

- - - - PED
        
        1) The more price-elastic the demand, the greater the tax incidence on producers.
        
        2) The more price inelastic the demand, the greater the incidence of taxation on consumers.
      - PES
        
        1) The more price-elastic the supply, the greater the incidence of taxation on consumers.
        
        2) The more price-inelastic the supply, the greater the incidence of taxation on producers.
  - - - As the price of goods increase, the amount of tax increases as well, causing a pivotal shift of the supply curve
    - - Since amount of tax is the same at all prices, a specific tax will cause a parallel shift in the supply curve.
  - - - Shown as the area below the demand curve and above the equilibrium price.
    - - Shown as the area above the supply curve and under the equilibrium price.
- - - - This causes black market, where sellers ignore the price restrictions which the government implemented and sell illegally at whatever price equals demand and supply.
    - - The price of a good is too high, thus setting a maximum price to lower it.
      - Set below equilibrium price
    - - The price is reasonable but just in case it increase rocket high, set a maximum price to regulate.
      - Set above equilibrium price.