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ECON 2030 Exam 2 (got 93% on the test)

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Department
Economics
Course
ECON 2030
Professor
All Professors
Semester
Fall

Description
ECON 2030 Exam 2Chapters 8 9 12 14 15 21Chapter 8Incidence of Taxation Reduce Quantity TransactedIncidence of TaxationoOn whom does the burden falloSuppliersTaxes on suppliers shift the supply curve upIn most cases equilibrium price rises and equilibrium quantity declinesoConsumersTaxes on consumers shift the demand curve upThis raises equilibrium price and reduces equilibrium quantityoIn both cases taxes reduce or limit tradeMotivationo005 tax increase is shared between buyer and selleroDoesnt matter who is taxed oWho is burdenedBuyer pays 003 more slightly more price inelasticSeller receives 002 lessoExamplesSales TaxCollected from buyerGas StationPay price on gas pump collected from seller built into the price you seeToolsoElasticityMagnitude of response to taxoEconomic SurplusTotal net benefit to society of engaging in market exchangeIn absence of government ESCSPSConsumer SurplusNet benefit of buyers for engaging in market exchangeCSBenefitCostCSReservation PriceActual PriceProducer SurplusNet benefit of sellers for engaging in market exchangePSBenefitCostPSActual PriceReservation PriceRational if Surplus isorto zeroQ is the only facor in ES Price is irrelevantoPrice is irrelevant because every dollar spent is another earned because it cancels outIncrease Demand CS PS ESIncrease PBadGoodIRRELEVANTIncrease QGoodGoodGood IncreasesAmbiguousIncreaseIncreaseGovernment Revenue TaxesTotal on a receipt is the Buyer PriceSubtotal on a receipt is the Seller PriceThe difference between the 2 is that the Total includes the tax for the buyerNet benefit to governmentGRAmount of Tax x QuantityTax AmountPrice paid by BuyerPrice of SellerESCSPSGRTax creates 2 different pricesThe price the buyer pays is not the same as the price the seller receivesDeadweight LossNet loss of ES as a result of taxWelfareBurden of TaxThe loss of PS and CS from a taxArea under curve see graphFunction of 3 variablesDLfsize of tax EESDLoss to buyerconsumer is less than or equal to gain by governmentChange is the same or lower without the taxHigh tax on inelastic goods will not get a big change in Q of Tax paid by BuyerEE100 ESSD of Tax paid by Seller E EE100DSDTaxIncreased buyer price buy less sellers sell lessPrice ElasticityoE Price Elasticity of SupplyS
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