ECONOM 1014 Study Guide - Midterm Guide: Productive Efficiency, Pigovian Tax, Marginal Cost

68 views2 pages
27 Mar 2017

Document Summary

Taxes: who pays the tax depends on elasticity of supply & demand, not laws. Suppliers: vertical distance between 2 supply curve (size of tax) Buyers: vertical distance between 2 demand curves (size of tax) Tax wedge: left of equilibrium, between supply & demand (just barely fits in the space) Taxes may reduce consumption by same amount as gov. regulation. Even if taxes raise no revenue, it can still produce a dwl. Elasticity of taxes: elasticity=escape (pay less tax for elastic) Inelastic less substitutes, less time to adjust, less specific classification, necessities, small purchase size. Elastic: more substitutes, more time to adjust, more specific classification, luxuries, large purchase size. Subsidies: reverse tax where gov. gives money to consumers/producers. Taxes & subsidies are similar because they create dwl, burden depends on elasticities of supply & demand, change equilibrium level of output. Subsidizing buyers is not different than sellers, taxpayers pay for subsidies.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related Documents

Related Questions