micro p173 10 101804

micro p173 10 101804 - D + E + F F-(D + E) Tax Revenue None...

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Adam Petrone-ID #000490127 10/18/04 MicroEconomics Sattinger p. 173 #10 a) b) c) The change in government revenue is an increase. The government increases its revenue as a result of the tax increase. The higher tax makes the income from taxes go up for the government. d) The change in deadweight loss is C + E. It is a negative loss. There is a fall in total surplus as sellers offer less cars as the price sellers receive goes down as a result of the tax increase. e) The demand for cars in New Jersey might be fairly elastic because of the prevalent availability of public transportation. Public transportation serves as a viable alternative to the owning of a car for transportation. This makes the additional tax more likely to Without Tax With Tax Change Consumer Surplus A + B + C A -(B + C) Producer Surplus
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Unformatted text preview: D + E + F F-(D + E) Tax Revenue None B + D +(B + D) Total Surplus A+B+C+D+E+F A + B + D + F-(C + E) increase government tax revenues. The reasoning behind this is that consumers demand for transportation remains fairly inelastic, while their demand for cars can become more elastic. Essentially, the government will always end up with the revenue whether it is through car sales or public transportation. States might try to reduce the elasticity of demand for cars by reducing the availability of public transportation (i.e. shutting down bus lines, offering fewer trains, etc.), and decreasing the tax on cars sold. The state could also subsidize gasoline costs and cut taxes on gasoline to encourage more car sale and use and thus reduce the elasticity of demand....
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This note was uploaded on 04/28/2008 for the course ECO 110 taught by Professor Liugang during the Fall '08 term at SUNY Albany.

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micro p173 10 101804 - D + E + F F-(D + E) Tax Revenue None...

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