Analyzing Shocks to Market Equilibrium
Governments often impose taxes on the consumption of goods deemed “undesirable”. For example, taxes are imposed on purchases of alcoholic beverages and tobacco
products. But rarely do governments impose restrictions on the quantity of such goods that consumer may purchase during a given period of time. For other goods, the
government instead mandates the maximum quantity that can be consumed. For example, limiting the quantity of fish that can be caught per year instead of charging
fishermen a tax on the number of fish they catch per year. Why do you think that in some cases a tax is used while in other cases a quantity limit is used?