econ 2030 2-17

econ 2030 2-17 - TODAYS MENU: Wednesday 16 February 2011 I....

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TODAY’S MENU: Wednesday 16 February 2011 I. BUSINESS A. Practice Problems 1. Chapter 8: 1, 3, 7-13, 16, 20 II. SUBSTANCE A. Incidence of taxation 1. Motivation 2. Tools a. Elasticity (price elasticity of supply & price elasticity of demand); appsence of government b. Economic surplus- something over and above; NET BENEFIT o ES= CS+PS ES=30+70 i. Consumer surplus- the net benefit to buyers from engaging in a market excahnge CS- Reservation price aka what the buyer thinks something is worth- o CS= Reservation Price- Actual Price i. 150-120=30 ii. Producer surplus- the net benefit to sellers ingaging in a market exchange Comment [JAL1]: Who bares the burden of taxation? If there was a purposed 5 cent increase per gallon on gas…. Business fight it because the only people who will incurred the cost are the buyers/aka voters because the gas price would increase for them. Comment [JAL2R1]: The business person is irrational because they realize that the buyers would pay the 5 cent more per gallon… but they
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econ 2030 2-17 - TODAYS MENU: Wednesday 16 February 2011 I....

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