BEPP 250 Lecture Notes - Lecture 10: High Fructose Corn Syrup, Economic Surplus, Deadweight Loss
26 Mar 2015
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Bepp 250 - business & economic public policy - lecture 10: taxation. Consider the market for a good. the government charges total taxes t = ts + td, with ts paid by producers and td paid by consumers. Finding an equilibrium is simple because it has to be that consumers pay more than producers get: Pd (q* ) = ps (q* )+ t. Write the inverse supply and demand curves. Solve pd (q* ) = ps (q* )+ t. Calculate the effective prices faced by each party. Ex) the demand for gasoline in a country equals (prices in usd/gallon, consumption in billion gallons per year): Pd = 10 - 0. 7q & ps = 0. 3q. Step 1: pd (q* ) = ps (q* )+ t. 10 0. 7q = 0. 3q + t. 0. 3 (10 t) = 3 0. 3t = . 70 here we plugged in 10-t for q as per above equation.
