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Microeconomics Chapter 8 Class Notes

# Microeconomics Chapter 8 Class Notes - Chapter 8 P r...

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ا دعب اما نیلسرملا دیس یلع ملسلاو ° ولصلاو نیملاعلا بر ±للا دمحل میجرلا نطیشلا نم ± للاب ذوعاف ! Chapter 8 Principles’ of Microeconomics: Eqm with no tax Price=P E Quantity = Q E Eqm with Tax = T per unit: Buyers pay P B sellers receive P S Total surplus will change after tax and it will decrease. Because of net weight. Without a Tax.

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C+E is called the deadweight loss (DWL) of the tax, the fall in total surplus that results from a market distortion such as a tax. About the dead weight loss.
The value of these units to buyers is greater than the cost of producing them, so the tax prevents some muttually beneficial trades. CS: ½ x 200 x 100 = 10,000 PS= ½ x 200 x 100 P= 200 = \$10,000 Total Surplus= 20,000. Different Slide from Above NOTE:

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What Determines the size of the DWL? Which goods or services should government tax to raise the revenue it needs. When supply is inelastic: it is change in (QS %/ change in P%) > 1 It’s harder for firms to leave the market when the tax reduces Ps.
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