AP Economics
Mr. Bernstein
Module 9:
Quantity Controls
October 2015
AP Economics
Mr. Bernstein
Quantity Controls
• Another example of Government Intervention in
markets
• Quotas (ie fishing limits)
• Limits (ie sugar imports into US)
• Licenses (ie taxi medallions)
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AP Economics
Mr. Bernstein
The Anatomy of Quantity Controls
• Quotas drive a
wedge between
Pd and Ps (price at
which consumers
will demand that
quantity and price
at which suppliers
will supply that quantity)
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AP Economics
Mr. Bernstein
The Anatomy of Quantity Controls
• Quota rent is
the difference
between Pd and Ps
• = market price
of a license
• Notice Quota
graph is just the
Ceiling/Floor problem turned sideways…
4
AP Economics
Mr. Bernstein
The Cost of Quantity Controls
• Inefficiency – missed opportunities for equilibrium
level exchanges
• Incentive for illegal activities (ie salmon poaching
above limits)
5
AP Economics
Mr. Bernstein
Defining Deadweight Costs: Quotas
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