ECON-100 FA4 Chapter Notes - Chapter 8: Deadweight Loss, Economic Surplus, Demand Curve

• School: American University
• Department: ECON - ECONOMICS
• Course: ECON-100 FA4
• Professor: Na

Document Summary

If we impose a tax on supply or demand, it will shift the supply and demand curve to the left. The final effect will be exactly the same. Price will be different, but the quantity being produced and sold will be smaller. triangle becomes smaller. The rectangular part between the 2 triangles is the tax revenue of the government. The triangle next to this is dead weight loss. What happens is that with the tax, the producer"s surplus triangle and the producer surplus weight loss is bigger, and quantity is smaller due to tax. It"s a transfer of supplier, the supply curve shifts to the left. If demand is elastic and supply is inelastic, it"s the producers who pay more of the tax. If demand is inelastic and supply is elastic, the consumer pays more. Depends on the elasticity of demand and supply. Consumer surplus: {(demand intersect p) x q} 2. Producer surplus: {(price supply intersect) x q} 2.