ECON-1010 Chapter Notes -Laffer Curve, Sin Tax, Capacity Utilization

• School: Vanderbilt University
• Department: Economics
• Course: ECON-1010
• Professor: Hojjatallah Ghandi

Document Summary

Private property rights and contracts: government provides basic laws to protect right of private property and guarantee contracts are enforced. A monetary system: gov"t establishes money that is widely accepted and has a stable value. Unemployment and capacity utilization: gov"t can sometimes help w/ the unemployment of labor, capital, and natural resources. Competition: policies aimed at increasing competition or sometimes at producing goods/services that markets otherwise would not pursue. Fairness: gov"t may redistribute income from those w/ higher incomes to those w/ lower incomes through taxes or subsidies. Sin tax: objectives are to discourage consumption of the good and to raise government revenue. Taxes cost of production increases price increases quantity demanded decreases quantity supplied increases. If inelastic, more of the tax can be passed along to consumers. The imposition of a tax on one side of the market (producers or consumers) results in a sharing of the burden.