AAEC 1005 Lecture Notes - Lecture 5: Excise, Deadweight Loss, Tax Incidence

• School: Virginia Tech
• Department: Agricultural and Applied Economics
• Course: AAEC 1005
• Professor: Stephenson

Document Summary

Benefits principle (people who benefit more should pay more) Ability to pay principle (people with higher income should pay more) What does the tax do to people"s incentives to work, invest. Excise tax: gov charge on the sale of a good or service (type of sales tax) Special extra sales tax on cigarettes, gasoline, alcohol. The price of cab rides is going to go up to . 50. The supply curve will shift to the left. Half is paid by the cab driver, and half is paid by the consumer (not always the case, but almost always shared somehow) Tax incidence: a measure of who really pays the cost of a tax.