ECON 20A Study Guide - Final Guide: Average Variable Cost, Thai Baht, Bering Sea

• School: UC-Irvine
• Department: Economics
• Course: ECON 20A
• Professor: All

Document Summary

Governments levy taxes to raise revenue to provide goods and services. There are often good economic reasons for the government or provide goods, e. g. courts, national defense, poverty reduction programs, highways. This lecture focuses on trade-off consequences of taxes. Deadweight loss is the trade-off consequence to society from the tax. The market is not allocating resources efficiently since there is a region where buyers value the good > cost and so prevents buyers and sellers from receiving some gains from trade. Buyers and sellers are responding to incentives induced by the tax: higher cost gives buyers incentive to consume less and producers and incentive to produce less by raising their cost. Before the tax consumer surplus was the area between the demand curve and. Old producer surplus was the area between the price and the supply curve which is d+e+f. Mankiw"s principle: international trade can make everyone better off. Illustrate social benefits to international trade not shared equally.