Week6__surplus_2

Week6__surplus_2 - than in the absence of the tax. As a...

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1 Efficiency of market equilibrium The maximum possible total surplus is achieved at market equilibrium. there is no way to rearrange consumption or  production such that gains will be higher than  in the market equilibrium.  Reallocate consumption among consumers Reallocate sales among sellers Change quantity traded. 
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2 Reallocate consumption among consumers S Q P
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3 Reallocate sales among sellers S Q P
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4 Change quantity traded.  S Q P
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5 Applying Consumer and Producer Surplus:  The Efficiency Costs of a Tax A tax causes a  deadweight loss   to society,  because less of the good is produced and consumed 
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Unformatted text preview: than in the absence of the tax. As a result, some mutually beneficial trades between producers and consumers do not take place. Deadweight loss are losses in consumer and/or producer surplus that are not gained by other entities in the economy. 6 A Tax Reduces Consumer and Producer Surplus S Q P 7 Deadweight Loss and Elasticities The less elastic supply or demand is Why? Ramsey Rule Real World Applications European Taxes Abe got it right...
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This note was uploaded on 03/30/2008 for the course ECON 2005 taught by Professor Zirkle during the Fall '07 term at Virginia Tech.

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Week6__surplus_2 - than in the absence of the tax. As a...

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