8 Econ Class notes - Ch. 8 Cost of Taxation do Questions...

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Ch. 8 Cost of Taxation do Questions for review 1-6, Problems/Apps 1, 6, 8, 9, 11 I. Deadweight loss of Taxation a. Remember that both the buyer and the seller share the burden of the tax no matter who the tax is being levied on b. Because of the tax, buyers pay more than the seller receive i. Government Revenue or Tax Revenue =Tax times Quantity Sold ii. Box going left from price buyers and sellers pay c. Welfare effects of taxation i. Welfare without tax 1. Consumer surplus is above equilibrium price, below tax 2. Producer Surplus is below equilibrium price, above tax 3. Total Surplus before tax? a. CS+PS+Government revenue (0) ii. Welfare with the tax 1. CS is above taxation price, below demand 2. PS is below taxation price, above supply 3. Government revenue is in between taxation prices 4. Total surplus after tax? a. CS+PS+Government revenue iii. Changes in Welfare 1. CS, above equilibrium, below taxation price 2. PS, below equilibrium, above taxation price 3. The tax causes an overall decrease in Total surplus
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This note was uploaded on 04/08/2008 for the course ECONOMICS 211 taught by Professor Petitfrere during the Fall '08 term at University of Miami.

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8 Econ Class notes - Ch. 8 Cost of Taxation do Questions...

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