7 Taxes Student Copy

7 Taxes Student Copy - Taxes and its effects on Supply and...

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1 Taxes and its effects on Supply and Demand and Welfare Chapter 3
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2 At the end of this Section, you should be able to: Show how taxes shift the supply and demand curves Measure the effects of taxes on welfare and surplus and find the DWL
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3 Types of Taxes Tax on Sellers Shifts the Supply curve Tax on Buyers Shifts the Demand curve
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4 Tax on Sellers 1. We Start at  an Equilibrium  Price and  Quantity 2. Suppose a tax is imposed on  Sellers – we shift the Supply  curve down at all points by the  amount of the tax 3. Suppliers then move along  the supply curve until  Qs+tax=Qd P2 is the price  Buyers pay. 4. The amount of the tax is  reduced from the price  Buyers pay and P3 is the  amount Sellers receive.                        P2 - Tax Amount = P3 =  Price received by Sellers
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5 Tax on Buyers 1. We Start at an  Equilibrium  Price and  Quantity 2. Suppose a tax is imposed on 
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This note was uploaded on 12/12/2011 for the course ECON 2306 taught by Professor Bailiff during the Spring '08 term at UT Arlington.

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7 Taxes Student Copy - Taxes and its effects on Supply and...

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