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Unformatted text preview: hat producers receive falls 10 2/9/2009 Taxation Applying a $t Sales Tax
Lost P Consumer Surplus Pc = Pp + t P0 Pp Lost Producer Surplus Tax revenue Q1 Qo
2/9/2009 Class 9 Supply Deadweight Loss Demand Q
11 Who gains and who loses? The incidence of the tax Some of the burden of the tax is borne by the consumer Some of the burden of the tax is borne by the producer This is true whether Consumers have to pay the taxman Producers have to pay the taxman 2/9/2009 Class 9 12 Upon whom should the tax be levied? Does it matter whether the tax is imposed upon The answer is "No" Producers (production tax) Consumers (sales tax) Production taxes (i.e. taxes levied on producers) are partially passed on to consumers in the form of higher prices Consumption taxes (i.e. taxes levied on consumers) are partially borne by...
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