Review Slides - Tax Incidence Price and Quantity Controls...

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Unformatted text preview: Tax Incidence Price and Quantity Controls Utility Maximization Total, Marginal, and Average Products Total, Marginal, and Average Costs Short vs. Long Run Long Run Costs Midterm 2 Review Session Ophira Vishkin November 8, 2010 Ophira Vishkin Midterm 2 Review Session Tax Incidence Price and Quantity Controls Utility Maximization Total, Marginal, and Average Products Total, Marginal, and Average Costs Short vs. Long Run Long Run Costs Tax Incidence Price and Quantity Controls Utility Maximization Total, Marginal, and Average Products Total, Marginal, and Average Costs Short vs. Long Run Long Run Costs Ophira Vishkin Midterm 2 Review Session Tax Incidence Price and Quantity Controls Utility Maximization Total, Marginal, and Average Products Total, Marginal, and Average Costs Short vs. Long Run Long Run Costs Tax Incidence I Relative elasticities of Supply and Demand I If D (S) is more inelastic, consumer (producer) will bear larger portion of tax. *Inelasticity is expensive*. Flipside: I If D (S) is more inelastic, consumer (producer) will enjoy larger portion of subsidy. I Consumer Tax Burden: P D- P competitive tax (in percentage terms) I Producer Tax Burden: P competitive- P S tax (in percentage terms) I Consumer Tax Burden + Producer Tax Burden = 100% I Subsidy benefit is analogous. Ophira Vishkin Midterm 2 Review Session Tax Incidence Price and Quantity Controls Utility Maximization Total, Marginal, and Average Products Total, Marginal, and Average Costs Short vs. Long Run Long Run Costs Price and Quantity Controls I Binding: Set such that you cannot reach competitive level....
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Review Slides - Tax Incidence Price and Quantity Controls...

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