Lab
Market Policy Lab
Demand and supply are straight lines, and the sliders set how steep each one is. Pick a policy, then move its slider. Before each move, say which shaded area will grow and which will shrink, then check the readouts.
Challenges
- With no policy, write down consumer and producer surplus. Now add a tax. Does tax revenue make up for all of the surplus that buyers and sellers lose? Which shaded area is the difference?
- Keep the tax at $15 and make demand much steeper than supply. Who pays more of the tax now? Then reverse the slopes and compare.
- Set a price ceiling above the market price. Why does nothing change? Then lower it until a shortage appears.
- With a binding price floor, move the floor higher. What happens to the quantity traded and to the deadweight loss?
- Find a tax size that collects as much revenue as possible with the starting slopes. Is the deadweight loss small or large there?