The Costs of Taxation

The Costs of - The Costs of Taxation Lecture 1 Supratim Das Gupta Key Questions to Address How does a tax affect consumer surplus producer surplus

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The Costs of Taxation Lecture 1 Supratim Das Gupta
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Key Questions to Address: How does a tax affect consumer surplus, producer surplus and total surplus What is the deadweight loss of a tax? What determines the size of this deadweight loss?
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Recall from Chapter 6 A tax: drives a wedge b/w the price the buyers pay and the sellers receive raises the price buyers pay; reduces the price sellers receive reduces the quantity bought and sold the effects are the same whether the tax is imposed on buyers or sellers
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APPLICATION: THE COSTS OF TAXATION 4 Q T The Effects of a Tax P Q D S Eq’m with no tax: Price = P E Quantity = Q E P S P B P E Q E Eq’m with tax = $ T per unit: Sellers receive P S Quantity = Q T Buyers pay P B Size of tax = $ T
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APPLICATION: THE COSTS OF TAXATION 5 The Effects of a Tax P Q D S Revenue from tax: $ T x Q T P S P B P E Q E Q T Size of tax = $ T
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THE COSTS OF TAXATION 6 The Effects of a Tax P Q D S Without a tax, P E Q E Q
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This note was uploaded on 06/03/2011 for the course ECON 224 taught by Professor Ozturk during the Fall '09 term at South Carolina.

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The Costs of - The Costs of Taxation Lecture 1 Supratim Das Gupta Key Questions to Address How does a tax affect consumer surplus producer surplus

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