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AP Economics Mr. Bernstein Module 9: Quantity Controls October 28, 2014 AP Economics Mr. Bernstein Quantity Controls • Another example of Government Intervention in markets • Quotas (ie fishing limits) • Limits (ie sugar imports into US) • Licenses (ie taxi medallions) 2 AP Economics Mr. Bernstein The Anatomy of Quantity Controls • Quotas drive a wedge between Pd and Ps (price at which consumers will demand that quantity and price at which suppliers will supply that quantity) 3 AP Economics Mr. Bernstein The Anatomy of Quantity Controls • Quota rent is the difference between Pd and Ps • = market price of a license • Notice Quota graph is just the Ceiling/Floor problem turned sideways… 4 AP Economics Mr. Bernstein The Cost of Quantity Controls • Inefficiency – missed opportunities for equilibrium level exchanges • Incentive for illegal activities (ie salmon poaching above limits) 5 AP Economics Mr. Bernstein Defining Deadweight Costs: Quotas 6
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