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Chapter 8

Microeconomics chapter 8.docx

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Department
Economics
Course
ECON 200
Professor
Dr.Neri
Semester
Fall

Description
Microeconomics Chapter 8  Atax on a good causes the size of the market for the good to shrink.  The benefit received by buyers in a market is measured by consumer surplus; the benefit received by sellers in a market is measured by the producer surplus.  Government: gets (T x Q) size of tax times quantity of good sold = total tax revenue  Then spends to provide public services.  Deadweight loss: fall in total surplus that results from a market distortion (tax).  Change in consumer surplus + change in producer surplus +change in tax revenue  Incentives: raise price-buyers buy less and suppliers supply less-shrink market  The greater the elasticities of supply and demand, the greater the deadweight loss of a tax. • Elastic + tax
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