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Lecture 5

EC120 Lecture Notes - Lecture 5: Economic Equilibrium, Demand Curve, LeadPremium

4 pages119 viewsFall 2018

Department
Economics
Course Code
EC120
Professor
Steffen Ziss
Lecture
5

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Tax Incidence Analysis:
- A tax of t per unit on either buyer or seller causes
- ...price paid by buyers (Ps) to equal price received by sellers (Ps) plus the tax [Pb =
Ps+t]
- ...a movement along both Supply and Demand curves
- ...equilibrium where t=vertical gap between S and D
- Tax burden does not depend on who collects the tax
- Most of the tax borne by
- ...buyers if supply is more elastic than demand
- ...sellers if demand is more elastic than supply
Tax Incidence Exercises: Indicate impact of $3 per unit tax
Market Efficiency:
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