Economics Chapter 6

Economics Chapter 6 - The greater the elasticity of supply,...

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A rent ceiling set below the equilibrium rent has powerful effects on a market. The reason is that the rent ceiling attempts to prevent the rent from regulating the quantities demanded and supplied The force of the law and the market forces are in conflict, are one or both of these forces must yield to some degree. Rent control protects the new renters who are able to find accommodation at the lower ceiling rent Rent control protects those who are already renting accommodation, Limits any increase in rent. The greater the elasticity of demand, the smaller the tax revenue
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Unformatted text preview: The greater the elasticity of supply, the smaller is the portion of the tax paid by the seller, the greater the decrease in the equilibrium quantity, and greater the dead weight loss A tax is efficient when supply is perfectly inelastic or demand is perfectly inelastic The benefit principle is the proposition that people should pay taxes equal to the benefits they receive from the services provided by government The ability to pay principle is the proposition that people should pay taxes according to how easily they can bear the burden of the tax...
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