ECON 1B03 Lecture Notes - Lecture 6: Deadweight Loss, Economic Surplus, Demand Curve
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24 Feb 2018
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Price elasticities of demand and supply the more elastic one or both curves are, the greater the deadweight loss more elastic means more responsive to the tax and therefore a greater drop in quantity traded. The size of the tax the greater the amount of the per unit sales tax, the greater the dwl. Calculating dwl recall the chicken wings example - always refer to a sketch when you want to calculate dwl so you can see what numbers you need. Dwl = 0. 5 x (amount of per unit tax) x (pre-tax q - after-tax q) Numerical example in a competitive market, market supply for watermelons is qs = 300p and market demand is qd = 915 - 5p in eq"m, qs = qd. sh. 01 less than before demand is more inelastic (steeper) than supply now suppose increased that the sh. 50 tax is levied on consumers the supply curve is una ected so qs =
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