<p>The outcomes are not same.</p>
<p>In the case of tax government would get the rectangle areas B+D, whereas in case of price celling consumers get the areas B+D.</p>
<p>Yes, the deadweight loss is the same in both cases, and the total surplus is also the same in both cases, <strong>but the total surplus is distributed differently</strong>.</p>
<p>PS: policies are not distinguished just based on outcomes. C02 Pigouvian tax or cap and trade quotas can be set up in a way that all outcomes are identical. Yet the policies are being distinguished in the literature because they use different tools.</p>
<p>An analogy: you can use both axe and knife for cutting, yet we have different names for these tools even if the outcome can be identical from using them in certain ways.</p>

CC BY-SA 4.0
2021-08-21T11:47:12.850Z
2021-08-21T11:47:12.850Z
1muflon1
<p>Same as the title. From the Graphs, I cannot see any difference or what makes policymakers to distinguished those two?</p>
<p><a href="https://i.sstatic.net/ith6B.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/ith6B.png" alt="enter image description here" /></a></p>
<p>Here is the capture from Perloff's textbook. Now compare this with the case that government impose a unit tax <span class="math-container">$(p_3-p_2)$</span> on suppliers. The tax case and price ceiling simply reach the same outcome, from what ground distinguished these two policies?</p>
<p>Appreciate for any comments</p>

CC BY-SA 4.0
2021-08-21T09:10:39.383Z
Theoretical differences depend on what you are trying to measure. Units sold? Surplus? Can you please share "the Graphs" (edit them into the question), so that we can better understand your problem?
Giskard
CC BY-SA 4.0
2021-08-21T09:11:12.780Z
Practical differences are quite clear: a price ceiling sets a price; a tax influences the price, but without perfect knowledge the government will not foresee the price.
Giskard
CC BY-SA 4.0
2021-08-21T09:44:59.680Z
I have been re-edited, cheers
LJNG
CC BY-SA 4.0
2021-08-21T09:46:07.773Z
Their CS, PS, WFL are all the same.
LJNG
CC BY-SA 4.0
2021-08-21T09:48:03.217Z
This is only one graph, for the price ceiling? There is no tax graph to compare it to?
Giskard
CC BY-SA 4.0
2021-08-21T09:51:30.940Z
Hi, there is no tax graph in this example, but aren't we know the if government impose a tax $(p_3-p_2)$ would shift supply upward, intersect at $(P_3,Q_2)$
LJNG
CC BY-SA 4.0
2021-08-21T09:54:25.583Z
I agree with your point about the intersect, but how do you know that "*CS, PS, WFL are all the same*"?
Giskard
CC BY-SA 4.0
2021-08-21T09:54:54.997Z
...and why do you write "*From the Graphs, I cannot see any difference*"?
Giskard
CC BY-SA 4.0
2021-08-21T09:58:11.720Z
my bad. I was trying to emphasis from the graph we cannot distinguish those two market outcome, and I thought it just straight forward to imagine a tax and price ceiling situation. I cannot find identical supply and demand with tax situation from the text  that can be compared with the capture.
LJNG
CC BY-SA 4.0
2021-08-21T09:59:07.883Z
Okay, so I think it would be a good idea to check if CS, PS and WFL are indeed all the same.
Giskard
CC BY-SA 4.0
2021-08-21T10:03:14.970Z
It's should be easy to re-draw on the capture, isn't it? remove the price ceiling, and impose the unit tax $(p_3-p_2)$  on the producer.  I was wondering why would one choose tax policy from another.
LJNG
CC BY-SA 4.0
2021-08-21T10:12:10.360Z
Oh, their welfare distribution is different between consumer and producer.
LJNG
<microeconomics><public-economics>
Any difference between the DWL results from tax and binding price ceiling, what makes govenment choose one over another?
LJNG
# Any difference between the DWL results from tax and binding price ceiling, what makes govenment choose one over another?

(Asked by: username_0 on 2021-08-21)

Same as the title. From the Graphs, I cannot see any difference or what makes policymakers to distinguished those two?

[![enter image description here](https://i.sstatic.net/ith6B.png)](https://i.sstatic.net/ith6B.png)

Here is the capture from Perloff's textbook. Now compare this with the case that government impose a unit tax $(p\_3-p\_2)$ on suppliers. The tax case and price ceiling simply reach the same outcome, from what ground distinguished these two policies?

Appreciate for any comments

**Tags:** microeconomics, public-economics
> **Comments:**
> **username_1**: Theoretical differences depend on what you are trying to measure. Units sold? Surplus? Can you please share "the Graphs" (edit them into the question), so that we can better understand your problem?  
> **username_1**: Practical differences are quite clear: a price ceiling sets a price; a tax influences the price, but without perfect knowledge the government will not foresee the price.  
> **username_0**: I have been re-edited, cheers  
> **username_0**: Their CS, PS, WFL are all the same.  
> **username_1**: This is only one graph, for the price ceiling? There is no tax graph to compare it to?  
> **username_0**: Hi, there is no tax graph in this example, but aren't we know the if government impose a tax $(p_3-p_2)$ would shift supply upward, intersect at $(P_3,Q_2)$  
> **username_1**: I agree with your point about the intersect, but how do you know that "*CS, PS, WFL are all the same*"?  
> **username_1**: ...and why do you write "*From the Graphs, I cannot see any difference*"?  
> **username_0**: my bad. I was trying to emphasis from the graph we cannot distinguish those two market outcome, and I thought it just straight forward to imagine a tax and price ceiling situation. I cannot find identical supply and demand with tax situation from the text  that can be compared with the capture.  
> **username_1**: Okay, so I think it would be a good idea to check if CS, PS and WFL are indeed all the same.  
> **username_0**: It's should be easy to re-draw on the capture, isn't it? remove the price ceiling, and impose the unit tax $(p_3-p_2)$  on the producer.  I was wondering why would one choose tax policy from another.  
> **username_0**: Oh, their welfare distribution is different between consumer and producer.  

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## 1 answers

### Answer by username_2 on 2021-08-21. Score: 1 | Accepted answer

The outcomes are not same.

In the case of tax government would get the rectangle areas B+D, whereas in case of price celling consumers get the areas B+D.

Yes, the deadweight loss is the same in both cases, and the total surplus is also the same in both cases, **but the total surplus is distributed differently**.

PS: policies are not distinguished just based on outcomes. C02 Pigouvian tax or cap and trade quotas can be set up in a way that all outcomes are identical. Yet the policies are being distinguished in the literature because they use different tools.

An analogy: you can use both axe and knife for cutting, yet we have different names for these tools even if the outcome can be identical from using them in certain ways.


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