Skip to main content
2: Welfare Analysis of Government Policies
- Last updated
Save as PDF
- 2.1: Price Ceiling
- In some circumstances, the government believes that the free market equilibrium price is too high. If there is political pressure to act, a government can impose a maximum price, or price ceiling, on a market.
- 2.2: Price Support
- 2.3: Quantitative Restriction
- 2.4: Import Quota
- 2.5: Taxes
- Taxes are often imposed to provide government revenue. The government also uses taxes to decrease the consumption of a good such as alcohol or tobacco. These taxes are called “sin taxes,” on goods that are not favored by society. These goods often have inelastic demands, which allows the government to apply a tax and earn revenues. Taxes can also be used to meet environmental objectives, or other societal goals: goods such as gasoline and coal emissions are taxed.
- 2.6: Subsidies
- 2.7: Immigration
- Labor-intensive agriculture such as fruit and vegetable production in high income nations employs immigrant workers and pays low wages. These workers offer an enormous contribution to the agricultural economy through hard work in the production of food and fiber. However, it is possible that immigration can have a negative impact on rural towns, since the provision of public services such as medical facilities, schools, and housing for low-wage workers is often costly.
- 2.8: Welfare Impacts of International Trade