4 PPT_Excise_Taxes - Excise Taxes Fundamental Point to remember about taxes With a tax present there are 2 prices of interest Price paid by demander PD

4 PPT_Excise_Taxes - Excise Taxes Fundamental Point to...

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Excise Taxes Fundamental Point to remember about taxes: With a tax present, there are 2 prices of interest: Price paid by demander: P D Price received by supplier: P S
Quantity vs. Value Tax Quantity tax: Levied per unit exchanged
Quantity vs. Value Tax Value tax: Expressed in % terms
Tax Incidence and Tax Burdgen Who bears the burden of the tax is not determined by who actually “pays” the tax. The accurate measure of the burden of the tax is the change in economic circumstances as a result of the tax. i.e., how do P D and P S change relative to the case where there was no tax?
Market Effect of a Quantity Tax
Tax Graphs

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