3. Economic effects of government policies F.4A economic project

4. Contents

5. A price ceiling is the maximum price a seller can charge for a good. For example: bus fares, taxi fares, tram fares, ferry charges etc. Why does the government have to set up the price control, what do you think? Helping the poor / those who cannot afford to pay the market price.

6. $3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone 2 Demand Supply Equilibrium price Price ceiling Shortage 125 Quantity demanded 75 Quantity supplied

7. A price floor is the minimum price the buyer is required to pay for a good. For example: the minimum wage law in H.K. for employment of Philippine maids. Why does the government have to set up the price control, what do you think? To protect the interest of some groups / sectors in society.

8. $3 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone Equilibrium price Demand Supply Price floor$4 120 Quantity supplied 80 Quantity demanded Surplus

9. A quota is a limit on the maximum quantity that can be offered for sale. For example: issue of taxi licenses, U.S. imposition of an import quota on garment exports. Why does the government have to set up the price control, what do you think? To protect their local industries / for political reasons.

10. P 0 Q Demand S1S1 P1P1 P Q S2S2 Q1Q1

11. The government imposes a tax on certain goods and services. These taxes are known as sales taxes. For example: import-tax on motor vehicles (F.R.T.), tax on cigarette (tobacco duty), alcohol (alcohol duty), airport tax, betting duty gasoline tax (fuel duty), etc.

12. There are TWO ways of imposing a sales tax: 1. The per-unit sales tax e.g. tax on cigarette, alcohol, airport tax, gasoline tax. 2. The ad valorem sales tax e.g. motor vehicles(F.R.T), hotel accommodation tax. Why does the government have to impose a sales tax? To increase the government revenue / to discourage of some goods.

13. 3.00 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone 100 90 S1S1 S2S2 Demand Price without tax 2.80 Price sellers receive $3.30 Price buyers pay A tax on sellers shifts the supply curve upward by the amount of the tax ($0.50). Tax ($0.50)

14. Sometimes, the government will provide a subsidy for producers and consumers either in a per-unit basis or an advalorem basis. For example: subsidy on education, transport subsidies for full-time students, subsidies for hospital services, public housing. Why does the government have to provide a subsidy? To help these in need / to encourage the consumption of some goods and services / to support the provision of some services e.g. utility.

15. 3.00 Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone 10090 S2S2 S1S1 Demand Price without sub. 2.80 Price buyers pay $3.30 Price sellers receive A sub. on sellers shifts the supply curve downward by the amount of the sub.($0.50). sub.($0.50)

16. Groups Members (4A) Carmen Wong (35) Ellen Wong (32) Emily Chan (2) Tracy Yu (40) ~END~