Chapter 7 Taxes >> THIRD EDITION MICROECONOMICS Paul Krugman | Robin Wells
•The effects of taxes on supply and demand in a competitive market •What determines who really bears the burden of a tax •The costs and benefits of taxes, and why taxes impose a cost that is larger than the tax revenue they raise •The difference between progressive and regressive taxes and the trade-off between tax equity and tax efficiency WHAT YOU WILL LEARN IN THIS CHAPTER
3 The Economics of Taxes: A Preliminary View •An excise tax is a tax on sales of a good or service. Examples: An excise tax levied on sales of hotel accommodation (paid by the hotel guest). An excise tax levied on sales of alcohol (paid by the retail shop). •Taxes drive a wedge between the price buyers pay and the price sellers receive. Buyers will have to pay more. Seller will receive less. •The tax incidenceis a measure of who bears the burden for a tax (who really pays for the tax).