ECON 102 Chapter Notes - Chapter 8: Market Distortion, Economic Surplus, Deadweight Loss

29 views2 pages
18 Mar 2019
School
Department
Course
Professor

Document Summary

Benefit received by buyers in market is measured by consumer surplus. Consumer surplus = amount buyers are willing to pay for the good amount they actually pay for it. Benefit received by sellers in market is measure by producer surplus. Producer surplus = amount sellers receive for the good their costs. Change in total welfare includes the change in consumer surplus, the change in producer surplus, and the change in tax revenue. Losses to buyers and sellers from a tax exceed the revenue raised by the government. Deadweight loss - fall in total surplus that results from a market distortion, such as a tax. When the government imposes a tax, it raises the price buyers pay and lowers the price sellers receive, giving buyers an incentive to consume less and sellers an incentive to produce less. Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Get access

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

Related Documents

Related Questions