Last+class - Announcements Finals: 11:15 Weds May 12,...

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Unformatted text preview: Announcements Finals: 11:15 Weds May 12, 10:05am GLC64 12:20 Sat May 8, 10:05am GLC64 Last HW due tonight! 2 parts. MT3 and Key are posted on Scholar Office hours this week: W,TH,F 2:30-4:30 or by appt. Office hours next week Mon, Tues 2:30-4:30 or by appt. Practice Qs for taxes and trade are on Scholar. Final Homework and iClicker grades will be posted by the end of the day on Friday. After MT3: Taxes Tax base, tax rate structure Taxes on stocks vs. taxes on flows (most taxes are on flows income, sales, etc) Progressive, regressive, proportional taxes. Marginal vs. average tax rate. Tax incidence: who pays the tax? Burden of a tax: taxes cause deadweight loss or burden because they distort peoples behavior. Taxes usually move us away from efficiency. Taxes move us toward efficiency if there is a negative externality. Neutrality more neutral taxes create less distortion and are better. S t S D S t S D Effects of price elasticity of D on tax incidence $0.20 Tax Price per ounce $1.15 1.00 0.95 Millions of ounces per day 10 9 $0.20 Tax 10 7 Price per ounce $1.05 1.00 0.85 (a) Less elastic demand (b) More elastic demand The more elastic the D curve, the more tax is paid by producers (lower net-of-tax receipt) Effects of price elasticity of S on tax incidence S t S D $0.20 Tax Price per ounce $1.15 1.00 0.95 (a) More elastic supply S t S D $0.20 Tax 10 9 Price per ounce $1.05 1.00 0.85 (b) Less elastic supply Millions of ounces per day 10 8 The more elastic the S curve, the more tax is paid by consumers as a higher price. MEASURING EXCESS BURDENS...
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This note was uploaded on 12/20/2011 for the course ECON 2005 taught by Professor Zirkle during the Fall '07 term at Virginia Tech.

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Last+class - Announcements Finals: 11:15 Weds May 12,...

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