07 - Markets, Efficiency, and the role of gov (2) 2/17/11...

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Markets, Efficiency, and the role of gov (2) 2/17/11 11:58 PM Study from powerpoint, A LOT OF DIAGRAMS Taxes The government levies taxes on many goods & services to raise revenues to pay for national defense, public schools, etc. The government can make buyers or sellers pay the tax. For simplicity, we analyze per-unit taxes only. Demonstration on how tax on buyers affects and shifts curves on the market Slides 16-19 demonstrate the effect a tax on buyer has on the market A tax on buyers shifts the D curve down by the amount of tax The Incidence of a Tax: How the burden of a tax is shared among buyers and sellers A tax on Sellers raises seller’s cost for selling product shifts the S curve up by the amount of tax Demonstrated in slides 20-21 The outcome is the same in both cases: the effects on P and Q, and the tax incidence are the same whether the tax is imposed on buyers or sellers Welfare in the absence of a Tax Graph on slide 23- self explanatory
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07 - Markets, Efficiency, and the role of gov (2) 2/17/11...

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