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Unformatted text preview: , on sales: o It could be a sales tax of 8.375%. If so: 8.375% p o It could be a fixed dollar amount e.g. gas of gallon per $2 o Or it could be a FICA (Social Security) tax on wage income. If so, the wage is the price of labor and: 15% wage x Again, consumers pay an effective price, p . , which: o is greater than market equilibrium price, * p o is greater than price that producers receive, p x Government collects revenue equal to the dollar amount of the tax times the quantity sold Page 41...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.
- Fall '10