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Lecture

ECO100 - OCT 17 Review

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Department
Economics
Course
ECO101H1
Professor
James Pesando
Semester
Fall

Description
● If you are choosing between A and B, then the benefit to you of both A and B is relevant ○ If you have decided on A, its opportunity cost does not depend on the benefit you assign to A ○ OC of A = Cash outlay with A plus (benefit of B - cash outlay with B) ○ Should not associate with benefit of A Case #1: Sales Tax Levied on Sellers No Tax Sellers Pay $ 10 Tax P QD QS P QD QS' 120 1 9 120 1 7 115 2 8 115 2 6 110 3 7 110 3 5 (at 100 no tax) 105 4 6 105 4 4 100 5 5 100 5 3 95 6 4 95 6 2 90 7 3 90 7 1 85 8 2 85 8 80 9 1 P = 100 P = 105 Q = 5 Q = 4 Price paid by buyer: Price paid by buyer: 100 105 Price received by seller: Price received by seller: 100 95 (P - 10) ● Ontario Receipt shows: 95 + 10 (tax) = 105 ○ 1) Does NOT imply that burden of tax (10) falls on buyers ○ 2) If there were no sales tax, price would be higher, at 100 ○ 3)Remember: the price to seller (95, if there is a tax) would be higher
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