1. Text: Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition.
Instructor: Sue Guzek, Kansas State University Salina
Music: We Gonna Make You… By Troy “Trombone Shorty” Andrews and Orleans
Avenue – Orleans and Claiborne
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2. 2
Price adjusts to equilibrium, balancing supply and demand

3.  Buyers say price is too
high
3

4. 4
+Qty Price
0 $ 1
1 $ 1
2 $ 2
3 $ 2
4 $ 3
5 $ 3
Qty Price
0 $ 1
2 $ 2
4 $ 2
6 $ 3
8 $ 3
Qty Price
0 $ 1
1 $ 1
4 $ 2
7 $ 2
10 $ 3
13 $ 3

5. 5
If the ceiling is higher than the equilibrium price, it doesn’t matter,
but if the ceiling is LOWER than the Equilibrium price…

6. 6
Price of Ice
Cream Cone
Quantity
Supplied
Shortage

7. 7
Price ceiling is designed to
benefit buyers, but not all
benefit

8. 8
See pages 114 and 115

9. 9
Bob and Cherry (producers)
say price is too LOW

10. 10
Sellers appeal to personal biases of buyers
and those with more connections are more
successful.
This intervention is also seen as undesirable
by economists

11. 11
Q supplied =
Workers
When production price is
forced up by higher price of
labor, Quantity demanded
is less and
Labor Surplus results in
unemployment
Price

12. 12
Price Buyers Pay $3.30
Price without tax $3.00
Price sellers receive $2.80
100
Tax on Sellers

13. 13
Price Buyers Pay $3.30
Price without tax $3.00
Price sellers receive $2.80
100
Tax on Buyers

14. 14
Price Buyers Pay $3.30
Price without tax $3.00
Price sellers receive $2.80
100
Taxes levied on sellers and
taxes on Buyers are
equivalent
AND reduce the size of the
market
The only difference is who actually sends the money to the
government!

15. 15
A tax burden falls more heavily on the
side of the market which is less elastic
When supply is more elastic than
demand the tax burden falls more on
the consumers
Than on producers
D

16. 16
A tax burden falls more heavily on the
side of the market which is less elastic
When demand is more elastic than
supply the tax burden falls more on
the Producers
Than on Consumers

17.  Price Ceiling
 Price Floor
 Tax burden
 Tax incidence
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18. Principles of Macroeconomics, N. Gregory
Mankiw, Sixth Edition: PowerPoint Slides
prepared by: Andreea CHIRITESCU, Eastern
Illinois University
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