Lecture 9 Notes - Econ 101 Introduction to Microeconomics...

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  Econ 101 Introduction to Microeconomics Professor Richard V. Burkhauser 8 8 Application: The Costs of Taxation
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Econ 101 – Professor Burkhauser Key Concepts deadweight loss, p. 163
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Figure 8.1 The Effects of a Tax Size of tax Quantity 0 Price Price buyers pay Price sellers receive Demand Supply Price without tax Quantity without tax Quantity with tax
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Econ 101 – Professor Burkhauser Tax Revenue T = the size of the tax Q = the quantity of the good sold T T times times Q Q = the government’s tax revenue = the government’s tax revenue How a Tax Affects Market Participants
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Figure 8.2 Tax Revenue Tax revenue ( T × Q) Size of tax ( T ) Quantity sold ( Q ) Quantity 0 Price Demand Supply Quantity without tax Quantity with tax Price buyers pay Price sellers receive
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Figure 8.3 How a Tax Effects Welfare A E B D C F Quantity 0 Price Demand Supply = P B Q 2 = P S Price buyers pay Price sellers receive = P 1 Q 1 Price without tax
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Table 8.1 How a Tax Affects Welfare
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Figure 8.4 The Deadweight Loss Cost to sellers Value to
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