Chapter 8 Notes

Chapter 8 Notes - sellers supply)-The size of tax also...

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Gov surplus= tax revenue= T(size of tax) x Q(quantity of good) Dead weight loss (DWL)= the decline in total surplus that results from a market distortion(Ex. Tax) - Taxes create DWL b/c they prevent buyers and sellers from realizing some of the gains from trade - The burden of the tax falls on whoever is more inelastic (between buyer’s demand/
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Unformatted text preview: sellers supply)-The size of tax also depends on elasticity-As amount of tax increases, size of DWL increases o And tax revenue increases until a certain point at which it starts to decrease ( Laffer Curve) o o...
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Chapter 8 Notes - sellers supply)-The size of tax also...

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