ECON 101 2Midtermreview

Value and consumer surplus the supply of water is

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Unformatted text preview: 50¢ a pack less So, exactly as before when sellers were taxed: Buyers pay $1.00 of the tax. Sellers pay the other 50¢ of the tax. Tax incidence is the same regardless of whether the law says sellers pay or buyers pay. Tax Division and Elasticity of Demand (diagrams below were discussed in class) The division of the tax between buyers and sellers depends on the elasticities of demand and supply. Case 1: Case 2: Case 3: Case 4: The more inelastic the demand, the larger is the buyers’ share of the tax. The more elastic the supply, the larger is the buyers’ share of the tax. Taxes in Practice Ø། Taxes usually are levied on goods and services with an inelastic demand or an inelastic supply. Ø། Alcohol, tobacco, and...
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This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.

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