Monopsony

A market condition where there is but one buyer of a well specified good or service. It enables the buyer to acquire the goods/services at a price below the market clearing price. While it may seem to be beneficial for the consumers, it actually isnt. Examples include fixing purchase prices, rigging the bidding outcome at antique auctions. Auction pools profit by the difference between the rigged price and the knockout price.

Tax on mobile cards

Whether the demand for mobile card is price elastic or inelastic.

Figure 7 How Deadweight Loss and Tax Revenue Vary with the Size of a Tax
(a) Deadweight Loss Deadweight Loss

Tax Size
Copyright 2004 South-Western

Figure 7 How Deadweight Loss and Tax Revenue Vary with the Size of a Tax
(b) Revenue (the Laffer curve) Tax Revenue

Tax Size
Copyright 2004 South-Western

Price Ceilings, Price Floors, and Deadweight Loss

Rent control Price ceiling Quantity supplied decreases CS increases Producer Surplus decreases Deadweight loss occurs Total surplus decreases. Minimum wage - price floor jobs less producer surplus (workers) increases while the consumer surplus (employers) decreases total surplus decreases due to deadweight loss.

Taxes, Subsidies, and Deadweight Loss

Tax on burgers shifts the supply backwards. This reduces the equilibrium quantity sold and increases the price paid by the consumers while keeping the price received by the buyers the same. Government collects tax = (Qs P) Consumer surplus and the producer surplus both shrink and there is a also a deadweight loss such that the total surplus has also shrunken due to inefficiency of the market caused by the governments intervention.

Cont.
If the demand is perfectly inelastic the burden of the tax is completely borne by the consumer. Supply shifts back. No deadweight loss as equilibrium quantity did not decrease. If the demand is perfectly elastic the burden of the tax is completely borne by the producer. No CS. Deadweight loss. The more elastic the demand the more the burden of tax falls on the producer.