4 PPT_Excise_Taxes

# 4 PPT_Excise_Taxes - 3 Methods – all give same result...

This preview shows pages 1–14. Sign up to view the full content.

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

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

View Full Document
Quantity vs. Value Tax Quantity tax: Levied per unit exchanged
Quantity vs. Value Tax Value tax: Expressed in % terms

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

View Full Document
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

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

View Full Document
Tax Graphs

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

View Full Document

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

View Full Document

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

View Full Document

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3 Methods – all give same result Gains and Losses P Q Algebra of Taxes Inverse Demand: PD = 20 – Q Inverse Supply: PS = 10 + Q Algebra of Taxes Inverse Demand: PD = 20 – Q Inverse Supply: PS = 10 + Q Passing Along a Tax Can firms pass a tax on to consumer? To figure this out, compare P D to previous P*. It all depends on the elasticities of demand and supply. Let’s consider some special cases Perfectly Elastic Supply P Q Perfectly Inelastic Supply P Q Suggested Homework Exercise What happens when:-Demand is perfectly elastic?-Demand is perfectly inelastic?...
View Full Document

## This note was uploaded on 09/08/2008 for the course ECON 130 taught by Professor Staff during the Winter '08 term at UCSD.

### Page1 / 14

4 PPT_Excise_Taxes - 3 Methods – all give same result...

This preview shows document pages 1 - 14. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online