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ECON 1010 (102)
Lecture 43

ECON 1010 Lecture 43: Lecture 43

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University of Manitoba
ECON 1010
Laura K.Brown

oS82 1. The price paid by buyers rises from P1 to P2 so consumer surplus only equal the area below the demand curve and above the buyers price 1. The price received b sellers falls from P2 to P1 so producer surplus now equals the area above the supply curve and below the sellers price o The quantity sold falls from Q1 to Q2 1. Total surplus with the tax = consumer surplus + producer surplus + tax revenue 2. Changes in welfare: 1. The tax makes buyers and sellers worse off and the government better off 1. The change in total welfare includes the change in consumer surplus (negative), the change in producer surplus (negative), and the change in tax revenue (positive) 1. The losses to buyers and sellers from a tax, exceed the revenue raised by the government 1. Deadweight loss: the fall in total surplus that results from a market distortion, such as a tax (triangles of surplus due to a tax by the
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