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GOV POLICIES - Coggle Diagram
GOV POLICIES
Taxes
tax on seller
tax on buyer
effect
discourage market activity
good is taxed -> qtt sold is smaller
buyer and seller share tax
Control price
price ceiling
legal maximum price can sell
affect market
IS binding -> below = price
NOT binding if set ABOVE the = price
effect of
shortage
QD < QS
nonprice rationing
price floor
legal minimum
affect market
NOT binding if set below = price
binding if set above the = price => surplus
prevents S & D from moving toward the = price & qtt
when price hits the floor -> no fall further -> market price = floor price
effect of
surplus because QS < QD
nonprice rationing