Jean Babtiste Colbert statutory incidence who bears the burden of a tax

Jean babtiste colbert statutory incidence who bears

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- Jean-Babtiste Colbert statutory incidence: who bears the _____burden of a tax economic incidence: who bears the ____burden of a tax - issue of "tax shifting" Excise taxes - taxes on specific commodities • specific (unit) tax - causes ______in S or D ex. 18.4¢ per gallon federal tax on gasoline • ad valorem (percentage) tax - causes pivotin S or D ex. 10% tax on airline tickets • economic incidence will depend on • in the presence of a tax, no longer a single price - price received by sellers price paid by buyers:
Micro 101, Chapter 4 16 Consider a unit tax imposed on the producers: • recall that S-schedule indicates the required Pin order to be willing to produce a particular • after a tax tper unit is imposed, suppliers will now require ______in order to produce that particular Q Q P
Micro 101, Chapter 4 17 • the tax leads to an upward-shift in the effective S-curve • at Q 1 , producers now require a higher price than what consumers are willing to pay • firms will accept a lower price only at a lower Q ; consumers will pay a higher price only at a lower Q Y production scaled back to Q 2 P D ends up higher while P S ends up lower (hurts both firms and consumers) - note that S more elastic than D: Y firms suffer less ) P than consumers Effects of a Unit Tax 0 2 4 6 8 10 12 14 0 1 2 3 4 5 6 Q P S 1 S 2 D P 2 D = P 2 M P 1 S = P 1 D = P 1 M P 2 S t = 6 Q 2 Q 1
Micro 101, Chapter 4 18 • Now impose the tax on consumers instead of producers: • conclusions: Tax on Producers Replaced by a Tax on Consumers 0 2 4 6 8 10 12 14 0 1 2 3 4 5 6 Q P S 1 S 2 D 1 P 2 D = P 2 M P 1 S = P 1 D = P 1 M P 2 S = P 2 M t = 6 Q 2 Q 1 X D 2
Micro 101, Chapter 4 19 • perfectly inelastic supply Y suppliers face full burden ex. land Tax on Land 0 2 4 6 8 10 12 14 0 1 2 3 4 5 6 land P S 1 = S 2 D 2 P 2 S = P 2 M P 2 D = P 1 S = P 1 D = P 1 M t = 4 Q 1 = Q 2 D 1
Micro 101, Chapter 4 20 • perfectly elastic supply Y suppliers face no burden ex. savings/investment in an open world economy Tax on Savings/Investment 0 2 4 6 8 10 12 14 0 1 2 3 4 5 6 savings / Investment interest rate S 1 S 2 D P 2 D = P 2 M P 2 S = P 1 S = P 1 D = P 1 M t = 4 Q 2 Q 1

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