ECON 2310 Chapter 15: Chapter 15 Intermediate Micro Notes

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azurecrow744

17 Dec 2011

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In canada, government imposes a goods & services tax (gst) in some provinces and a harmonized sales tax (hst) in others. Specific tax: is a fixed dollar amount that must be paid n each unit bought or sold. Ad valorem tax: tax that is stated as a % of the good"s price. In a perfectly competitive market, the burden of tax is shared by both consumers & firms. Incidence: of tax indicates how much of the tax burden is borne by various market participants. Depends on shapes of demand & supply curves. Consumer bear the larger share of tax when demand is less elastic then supply. When government is choosing items to tax, he should tax goods for which dead weight loss of taxation is low. Involves choosing goods w/ inelastic supply or demand. Subsidy: payment that reduces the amount that buyers pay for a good or increases the amount that sellers receive.

Related Questions

Suppose the government places a per-barrel unit tax on suppliers of oil. The oil market has a positively sloped supply curve and a negatively sloped demand curve. Who will bear the economic incidence (burden) of this tax? A. The suppliers of oil will bear the entire burden. B. If supply is relatively more price elastic than demand, then suppliers will bear most of the burden. C. If supply is relatively more price elastic than demand, then consumers will bear most of the burden. D. The consumers of oil will bear the entire burden. E. Suppliers and consumers will share the burden equally,

Which of the following statements is false?

(A) Consumers with an elastic demand for a service will not bear the burden of a tax if the suppliers of a good have an inelastic supply

(B) Suppliers with an inelastic supply for a service will not bear the burden of a tax if the consumers of a good have an elastic demand

(C) Suppliers with an inelastic demand for a service will bear the budern of a tax if the consumers of a good have a perfectly elastic demand

(D) Consumers with an inelastic demand for as ervice will share the burden of a tax if the suppliers of a good have an inelastic supply

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Price (cents per brownie) The graph shows the demand curve and supply curve for chocolate brownies. S + tax A 20 cent tax is imposed on brownies sellers. The supply curve shifts (Up;Down) by 20 cents. Calculate the Tax burden for consumers and producers S + tax cents Tax burden on Consumers Tax burden on Producers cents Calculate the tax revenue and deadweight loss million The government's tax revenue is $ The deadweight loss is $ _ _million. Quantity (millions of brownies per day)

ECON 2310 Chapter 15: Chapter 15 Intermediate Micro Notes

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