Transcript Tax

Economic
effects of
government
F.4A economic project
policies
Contents
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.
Price of
Ice-Cream
Cone
Supply
Equilibrium
price
$3
Price
ceiling
2
Shortage
Demand
0
75
Quantity
supplied
125
Quantity
demanded
Quantity of
Ice-Cream
Cones
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.
Price of
Ice-Cream
Cone
Surplus
$4
Supply
Price floor
$3
Equilibrium
price
Demand
0
80
Quantity
demanded
120
Quantity
supplied
Quantity of
Ice-Cream
Cones
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.
P
S2
S1
P1
P
Demand
0
Q1
Q
Q
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.
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 .
Price of
Ice-Cream
Cone
Price
buyers
pay
Price
without
tax
S2
$3.30
3.00
2.80
S1
Tax ($0.50)
A tax on sellers
shifts the
supply curve
upward by the
amount of the
tax ($0.50).
Price
sellers
receive
Demand
0
90 100
Quantity of
Ice-Cream Cones
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.
Price of
Ice-Cream
Cone
Price
sellers
receive
Price
without
sub.
S1
$3.30
3.00
2.80
S2
sub.($0.50)
A sub. on sellers
shifts the supply
curve downward
by the amount of
the sub.($0.50).
Price
buyers
pay
Demand
0
90 100
Quantity of
Ice-Cream Cones
Groups Members (4A)
Emily Chan (2)
Ellen Wong (32)
Carmen Wong (35)
Tracy Yu (40)
~END~