Economics 10a Chapter 8: Chapter 8 - The Costs of Taxation
10 Feb 2014
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Welfare: economic well being of society tax revenue: t (size of tax) x q (quantity of good sold) losses to buyers and sellers from a tax exceed the revenue raised by the government deadweight loss: fall in total surplus that results from a market distortion incentives are distorted (cid:224) buyers consume less and sellers produce less taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade can discourage transactions (cid:224) trade doesn"t happen and government doesn"t gain revenue either triangle between supply demand curves to the right of vertical tax line represents deadweight loss (trades that are not realized)
