01:220:102 Chapter Notes - Chapter 7: Excise, Deadweight Loss, Tax Efficiency
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01:220:102 Full Course Notes
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Incidence of a tax is a measure of who really pays it: doesn"t depend on who the tax is officially levied on, depends on the price elasticities of demand and of supply. The higher the price elasticity of supply and lower the price elasticity of demand heavier the burden of an excise tax on consumers. The lower the price elasticity of supply and higher the price elasticity of demand heavier the burden of an excise tax on producers. Tax rate- amount of tax people are required to pay per unit of whatever is being taxed. Deadweight loss from the tax- difference between the tax revenue from an excise tax and the reduction in total surplus. Administrative costs of a tax- resources used by government to collect the tax, and by taxpayers to pay it, over and above the amount of the tax, as well as to evade it.