ECO 2023 Lecture Notes - Lecture 10: Deadweight Loss, Opportunity Cost, Economic Surplus

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cerisegiraffe538

1 Oct 2015

School

University of Florida

Department

Economics

Course

ECO 2023

Professor

Mark Rush

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Document Summary

Eco 2023 - lecture 10 - taxes and international trade. If the price paid by the buyers rises by the full amount of the tax, then the full amount of the burden falls on the buyers. If the price rises by less than the amount of the tax, the burden falls on both the buyers and the sellers. A tax on sellers decreases the supply of the product, so the supply curve shifts to the left. The price paid by buyers rises and the price received by sellers falls. Suppose a tax is imposed on a box of cookies. The tax shifts the supply curve to upward or to the left by the amount of the tax (in this case, ). Tax incidence: the division of the burden of a tax between buyers and seller. The tax incidence depends on the price elasticity of demand and the price elasticity of supply.

Related Questions

Price (cents per brownie) The graph shows the demand curve and supply curve for chocolate brownies. S + tax A 20 cent tax is imposed on brownies sellers. The supply curve shifts (Up;Down) by 20 cents. Calculate the Tax burden for consumers and producers S + tax cents Tax burden on Consumers Tax burden on Producers cents Calculate the tax revenue and deadweight loss million The government's tax revenue is $ The deadweight loss is $ _ _million. Quantity (millions of brownies per day)

Please explain/prove your answers. Are the following statements true or false?

A. A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

B. If the government places a $2 tax in the market, the seller bears $2 of the tax burden.

C. Buyers and sellers rarely share the burden of a tax equally.

D. When a tax of $1.00 per gallon is imposed on sellers of gasoline, the supply curve for gasoline shifts upward, but by less than $1.00.

E. If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

jadeeel186

Draw the demand and supply curve for cookies. If the government imposes a tax on cookies, show what happens to the price paid by the buyers, the price received by the sellers, and the number of cookies sold. In your diagram, show the deadweight loss from the tax. Explain the meaning of deadweight loss.

chocolatespider395

ECO 2023 Lecture Notes - Lecture 10: Deadweight Loss, Opportunity Cost, Economic Surplus

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