Supply and Demand: Quantity Controls

Supply and Demand:
Quantity Controls
Module 9
Feb 2015
Controlling Quantities
 Quantity control or quota – a system by which the government regulates
the quantity of a good that can be bought and sold
 License – gives the right to supply a good or service
 Demand price – the price at which consumers want to buy a given
 Supply price – the price at which producers will supply that quantity
 Wedge – The space between the demand price and the supply price of a
good; tht is, the price paid by buyers ends up being higher than that
received by the sellers.
 The difference b/t the demand and the supply price at the quota amount
is the quota rent, the earnings that accrue to the license-holder from
ownership of the right to sell the good. It is equal to the market price of the
license when the licenses are traded.
Controlling Quantities
 Deadweight losses – the lost gains associated with transactions tat do not
occur due to market intervention.
 Do Module 9 questions and check answers with teacher