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Unformatted text preview: Clague- Economics 102 Exam 2 Review on Taxation Chapter 6 Price ceiling= excess demand Price floor= excess supply Rent control in part of market causes vertical supply curve of uncontrolled part to shift left & rent to be higher in uncontrolled parts Tax paid on buyers shifts demand curve down by amount of tax • Study of who bears burden of tax • Tax on sellers shifts supply curve up Tax incidence-manner in which burden of tax is shared in market • Who pays the tax has no effect Elastic- highly responsive to changes in the price charged. • Tax burden falls more heavily on side that is less elastic (steeper curve) Inelastic- unresponsive/not change much when price changes • Steeper curve More elastic supply/demand curves, greater decline in Q caused by tax, greater deadweight loss If govt. imposes price floor above equilibrium price, Qs will rise more in long run than If govt....
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This note was uploaded on 04/07/2008 for the course ECON 102 taught by Professor Clague during the Spring '08 term at San Diego State.
- Spring '08