AP Economics Mr. Bernstein Module 9: Quantity Controls October 2015

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 P d and P s (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 P d and P s = 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