Market Distortions
A government can enforce a law that influence markets. This chapter explores the consequences of various market distortions in a perfectly competitive market.
Objectives
Analyze the welfare implications of:
- A Quota — when the quantity supplied is limited
- A Price Floor — when the price cannot fall below a certain price
- A Price Ceiling — when the price cannot exceed a certain price
- A Tax on Consumers — when the government collects a tax from consumers for each product sold
- A Tax on Producers — when the government collects a tax from producers for each product sold