ch18 - low deadweight loss (i.e. goods with low demand...

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Chapter 18 – Taxation and public expenditure Taxation and allocative efficiency Taxing goods that are competitively provided and do not create externalities causes… …total surplus to fall from its maximum level ( deadweight loss of taxation) . …producer & consumer surplus losses to exceed tax revenue. An efficient tax system taxes goods that generate… …externalities
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Unformatted text preview: low deadweight loss (i.e. goods with low demand and/or supply elasticities) Exercise 18.1 : Find the change in tax revenue, CS, PS and deadweight loss caused by a $10/unit tax. D = MB P = MB S S = MC P = MC S $/unit 45 40 35 30 25 20 15 10 5 10 20 30 40 50 60 70 80 90 100 Q Maria Gallego EC120- Chapter 18 Taxation and Public expenditure 1 of 1...
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