Chapter 8 Costs of Taxation

Chapter 8 Costs of Taxation - surplus. D S 50 100 150 200...

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Chapter 8 Application: The Costs of Taxation
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Deadweight loss is the fall in total surplus that results from a market distortion.
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$ Quantity S D 5 100 4 60 II IV I III V VI Without a Price Ceiling CS = I + II PS = III + IV + V TS = I + II + III + IV + V
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$ Quantity S D 5 100 4 60 II IV I III V VI CS = I + III PS = V TS = I + III + V With a Price
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$ Quantity S D $25 300 $20 $30 20 0 With a Price
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$ Quantity S D 5 100 4 60 II IV I III V VI Deadweight loss = II + IV With a Price
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$ Quantity S D 8 12 6 10 S + $2 7 $2
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$ Quantity S D 8 12 6 10 II IV I III V VI 7 CS = I + II + III PS = IV + V + VI TS = I + II + III + IV + V + VI S + $2 Without the $2 tax
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$ Quantity S D 8 12 6 10 II IV I III V VI S + $2 7 CS = I PS = VI Tax Revenue = II + IV TS = I + VI + II + IV With the $2 tax
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$ Quantity S D 8 12 6 10 II IV I III V VI S + $2 7 Deadweight loss = III + V
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Compute: CS, PS, and total
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Unformatted text preview: surplus. D S 50 100 150 200 250 300 350 400 25 50 75 100 125 P Q $ The market for airplane tickets Analysis of tax $100 tax per ticket Now compute: CS, PS, tax revenue, total surplus, and DWL. D S 50 100 150 200 250 300 350 400 25 50 75 100 125 P Q $ The market for airplane tickets Chapters 8 Deadweight loss = the cost of the distortions introduced by a tax Deadweight loss in a supply and demand diagram Consumer surplus, producer surplus, and total surplus without a tax Consumer surplus, producer surplus, tax revenue, and total surplus with a tax Deadweight loss = reduction in total surplus...
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This note was uploaded on 12/30/2011 for the course ECON Econ 200 taught by Professor Clement during the Fall '11 term at Maryland.

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Chapter 8 Costs of Taxation - surplus. D S 50 100 150 200...

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