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Government intervention - Coggle Diagram

- - - - When analysing the effects of a tax, economists look at the incidence of taxation.
      - The incidence of the tax is the distribution of the burden of tax between sellers and buyers.
      - Indirect taxes are paid to tax authorities indirectly by the suppliers of goods and services, thus they lead to a leftward shift of the supply curve.
      - When PED<PES, buyers bear a greater burden of the tax.
      - When PED>PES, sellers bear greater burden of the tax
- - - - Size of surplus depends on:
        
        How high the price floor is set
        
        PED & PES
        
        Change in demand or supply curve
  - - - how low the price ceiling is set
      - PED&PES
      - changes in demand or supply curve
    - - Queues if goods are sold on 1st-come-1st-serve-basis
      - May require distribution of limited coupons
      - Restrict sales to favoured customers. (inequity)
      - Thus resulting in black market, where people ignore price seiling and sell illegally above Pmax to get a hold of the good, taking advantage of desparate consumers who have high need of the good.