Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Focus: Government Intervention: Price Controls, Taxes & Subsidies · Objective 4 · SLO A & B

📋 Module Overview Page — "Start Here" (Canvas: Page, published)

Week 7 — Government Intervention: Price Controls, Taxes & Subsidies

This week we take the supply-and-demand model you've built since Week 3 and ask: what happens when a government steps in and overrides the market price? The answer—depending on the policy—is a shortage, a surplus, a hidden tax burden, or a deadweight loss. By the end of this week you'll read a policy proposal and immediately see who pays, how much is lost, and why.

The big question: When a government sets a price or levies a tax, who really bears the cost—and how much efficiency is sacrificed?

By the end of this week, you can:

• explain the difference between a binding and a non-binding price control;
• predict whether a price ceiling (below equilibrium) produces a shortage and whether a price floor (above equilibrium) produces a surplus;
• compute tax incidence (buyer burden and seller burden) from supply and demand equations;
• calculate tax revenue and deadweight loss (DWL) using the verified market numbers;
• evaluate the trade-offs of minimum-wage and rent-control policies evenhandedly.

Do this, in order:

1. Read & watch — the Week 7 resources (≈40 min). → Readings & Resources page
2. Lecture Tutorial — work through price controls, tax incidence & DWL with your AI tutor (≈45 min). Due Sun, Oct 18. → submit the chat share link + summary
3. Practice Exercises — 6 quick reps, ungraded (≈15 min).
4. Quiz 7 — 10 questions, closed to AI (≈20 min). Due Sun, Oct 18.
5. Discussion 7 — minimum wage or rent control: positive model vs. normative debate. Initial post Fri, Oct 16, replies Sun, Oct 18.
6. Assignment 7 — price controls, tax incidence, DWL problem set (100 pts). Due Sun, Oct 18.
7. Workshop 7 — Graph & Model Workshop — impose a $4 tax on the verified market and solve for Q, Pb, Ps, incidence, revenue, and DWL (50 pts). Due Sun, Oct 18.

A note before you start: this week is the payoff of every graph and equilibrium concept from the last four weeks. The numbers are a little more involved than before—so use the scaffold, show every step, and check your arithmetic twice. The AI in the workshop will almost certainly make an error on incidence or DWL; catching it is the point.

📣 Welcome Announcement (Canvas: Announcement; available_from_offset_days = 0 — posts Mon, Oct 12)

Subject: Week 7 — Governments, Price Controls & the Hidden Cost of Every Tax

Hi everyone,

This week is where the supply-and-demand model earns its keep. You've seen how free markets reach equilibrium. Now we ask: what happens when a government decides not to let the market settle there?

A price ceiling too low creates a shortage. A price floor too high creates a surplus. A tax drives a wedge between what buyers pay and what sellers keep—and that wedge shrinks the total size of the market in a way that hurts both sides. We call that shrinkage deadweight loss, and you'll compute it exactly.

Three things to nail this week:

• Binding vs. non-binding: a ceiling only matters if it's below equilibrium; a floor only matters if it's above it.
• Incidence ≠ who writes the check: a tax levied on sellers can still fall partly—or entirely—on buyers, depending on elasticities.
• DWL = ½ · tax · ΔQ: every transaction that would have happened without the tax but doesn't is a loss to society.

This is also the last week before the midterm, so treat it as a synthesis: price controls and taxes show up on virtually every economics exam ever written.

See you in class,
Prof. Kessler