ECON101 Lecture Notes - Economic Equilibrium, Deadweight Loss, Equilibrium Point

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Wokia Kumase

Document Summary

Tax on sellers: supply curve shifts leftward, get a new equilibrium point, the new equilibrium price is the price paid by buyers. Draw a vertical line downward, the intersect with original supply curve: its price is the price received by sellers: compare the price paid by buyers, the price received by sellers with the original equilibrium price Tax on buyers: the demand curve shifts leftward, get a new equilibrium point, the new equilibrium price is the price received by sellers. Draw a vertical line, the intersect with the demand curve: its price is the price paid by buyers: compare the price paid by buyers, the price received by sellers with the original equilibrium price Once we put a tax on either buyers or sellers, the market has underproduction and has a dead-weight loss. The consumer surplus and producer surplus are decreasing.