Supply and Demand: Quantity Controls Module 9 Feb 2015

Controlling Quantities  Quantity control or quota – a system by which the government regulates the quantity of a good that can be bought and sold  License – gives the right to supply a good or service  Demand price – the price at which consumers want to buy a given quantity  Supply price – the price at which producers will supply that quantity  Wedge – The space between the demand price and the supply price of a good; tht is, the price paid by buyers ends up being higher than that received by the sellers.  The difference b/t the demand and the supply price at the quota amount is the quota rent, the earnings that accrue to the license-holder from ownership of the right to sell the good. It is equal to the market price of the license when the licenses are traded.

Controlling Quantities  Deadweight losses – the lost gains associated with transactions tat do not occur due to market intervention.  Do Module 9 questions and check answers with teacher