Lecture 15

Lecture 15 - First known tax was in Ancient Egypt around...

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February 18, 2009 7.2 Price Floors Price floor – a govt regulation that places a lower limit on the price at which a particular good, service, or factor of production may be traded Ex.) Minimum wage Minimum wage law – a govt regulation that makes hiring labor for less than a specified wage illegal Firms can pay a wage rate above the minimum wage but they may not pay a wage rate below the minimum wage On a graph of this, workers are represented by the SUPPLY curve while firms are the DEMAND curve If you have 7,000 people wanting to work, but only 3,000 jobs how do you allocate them? Minimum wages shrink the firms’ and workers’ surplus, which creates a deadweight loss. Is minimum wage efficient? The total loss exceeds the deadweight loss because resources get used in costly job-search activity Chapter 8 TAXES To tax is to impose a financial charge (levy) on an individual or business by a govt entity
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Unformatted text preview: First known tax was in Ancient Egypt around 3,000 BC Purposes: • Revenue • Redistribution • Alter behavior Nominal Gross Domestic Product (NGDP) measures the size of the economy Types of Taxes • Direct Tax – a tax upon an individual • Indirect Tax – a tax upon an activity • Personal Income Tax - % of income • Corporate Income Tax - % of profits • Sales Tax - % of purchase price • Property Tax - % of value of property • Capital Gains Tax – % of profits from sale of assets (gain from an investment) • Payroll Tax - % of income devoted to Social Security • Lump Sum Tax - $ per person or household (not a %) Calculating Taxes Paid: T = total taxes paid Y = income Average Tax Rate = T/Y Marginal Tax Rate = % of an additional dollar of income that is paid in taxes If you over tax people, then they don’t have enough income to participate in the economy....
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This note was uploaded on 09/29/2009 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.

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Lecture 15 - First known tax was in Ancient Egypt around...

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