Menu_21_Sep_10 - i Consumer surplus(CS plus ii Producer...

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TODAY’S MENU: Tuesday 21 September 2010 I. BUSINESS A. Practice Problems 1. Chapter 8: 1, 3, 6-13, 16-18, 20 II. SUBSTANCE A. Incidence of taxation Excise tax – tax per unit Sales tax – percentage of value of good 1. Motivation Business man is testifying on a bill to increase tax on an item It’s a big difference between saying whom the tax is collected the customer or the seller. Who is bearing the burden of the tax? 2. Tools a. Elasticity Price Elasticity of Demand Price elasticity of Supply b. Economic surplus ES =
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Unformatted text preview: i. Consumer surplus (CS) plus ii. Producer surplus (PS) plus iii. Government revenue iv. Deadweight loss v. Examples 3. Examples a. Who bears the burden of a tax? b. How is economic surplus affected? 4. Extensions: related topics a. Subsidies b. Price controls/quantity restrictions c. Third-party-payer markets III. NEXT TIME A. Finish Chapter 8: “Taxation and Government Intervention” B. Begin Chapter 9: “International Trade Policy…”...
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