Chapter 12

Chapter 12 - Chapter 12 One of the then principles from ch...

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Chapter 12 One of the then principles from ch 1 o A government can sometimes improve market outcomes. Lessons about taxes: o A tax on a good reduces the market Q of that good o The burden of a tax is shared between buyers and sellers depending on the price elasticities of demand and supply o A tax causes a deadweight loss. Receipts of the US federal Govt, 2008 o Individual income taxes: 45% o Social insurance taxes: 35.7 % o Corporate income taxes: 12.1 % o Other 6.9 % Taxes and Efficiency o One tax system is more efficient than another if it raises the same amount of revenue at a smaller cost to toaxpayers o The cost to taxpayers include: The tax itself Deadweight losses Administrative burden Deadweight Losses o People respond to incentives o Recall from Chapter 8: Taxes distort incentives, cause people to allocate resources according to tax incentives rather than true costs and benefits. o
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This note was uploaded on 01/22/2012 for the course ECON 102 taught by Professor Yotsubo during the Fall '08 term at Rutgers.

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Chapter 12 - Chapter 12 One of the then principles from ch...

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