Microeconomics Chapter 8 Class Notes

Microeconomics Chapter 8 Class Notes - & ! Chapter 8 P...

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Unformatted text preview: & ! Chapter 8 P rinciples of Microeconomics: Eqm with no tax P rice=P E Quantity = QE Eqm with Tax = T per unit: Buyers pay PB sellers receive P S Total surplus will change after tax and it will decrease. Because of net weight. Without a Tax. 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: x 200 x 100 = 10,000 PS= x 200 x 100 P= 200 = $10,000 Total Surplus= 20,000. Different Slide from Above NOTE: What Determines the size of the DWL? Which goods or services should government tax to raise the revenue it needs....
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This note was uploaded on 03/14/2011 for the course ECON 2304 taught by Professor Majumder during the Spring '07 term at University of Houston.

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Microeconomics Chapter 8 Class Notes - & ! Chapter 8 P...

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