ECON 240 Study Guide - Midterm Guide: Normal Good, Budget Constraint, Proportional Tax
10 May 2016
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Consumer enters utility function directly so good measure of utility. Tax on consumers is what is taken out of social pot rather than income which is what you put into social pot. Not good because it does not serve ve real well. Can make consumption tax as progressive as desired and institute minimum tax. Any consumer tax does not tax return on savings so it will not distort saving decisions, and better for investment, productivity and economic growth. Both consumer and income tax will generate dead weight loss. Simpler because just pit with no savings or capital income being taxed. Includes all expenditures on non-durable goods(used during the year) and flows of consumption services from and durable goods(long periods of time) ex) spend on stove-expect to last 10 years and provides. in stove services a year-this is impractical because of measurement issues.
