{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Class02_6

Class02_6 - Class Notes(cover part of Chapter 6 in the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Class Notes (cover part of Chapter 6 in the textbook) Class Outline Taxation Taxation Taxation creates a wedge between the price consumers pay, p c , and the price sellers receive, p s ! p c = p s + tax p s = p c – tax Taxation can destroy mutually beneficial exchanges! Example : Used Fiat Punto sale. Def. Tax incidence Tax incidence is the division of the burden of a tax between the buyer and the seller. When the government imposes “de jure” a tax on either the seller or the buyer, “de facto” the tax burden may fall on both of them. Example : Tax on cigarettes 1a) Tax on sellers Consider the market for cigarettes. In equilibrium the price per pack of cigarettes is $3 and the equilibrium # of packs of cigarettes is 350 (in millions). Suppose the government imposes a tax of $1.5 on sellers. The minimum supply price increases by the full amount of the tax and the supply shifts left. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 6

Class02_6 - Class Notes(cover part of Chapter 6 in the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online