Summary
Summary Microeconomic Intervention and Taxes
- Course
- Institution
Summary Notes on Microeconomic Intervention
[Show more]
Seller
Follow
khushisampat
Content preview
l l l l l l l l l l l l l l l l l l im i c r o e c o n o m i c S
l l l l l l
⑤ Show graphically the effect of a tax on market outcome ( equilibrium price and
quantity) .
P supply Tax From the
w .
supply producers perspective any tax levied on ,
them is just an increase in the marginal costs
(s B
DW h
Pz . . . . . . . .
✓ per unit .
Gov .
I A
Pa ? If the
i
government levies a tax on the producer
- -
-
. .
.
I .
,
: the
supply curve will shift up and a new equi
-
-
Demand librium will
t
at B
'
Pz
- - y s
be
, -
created The
,
quantity
.
.
.
PS
. .
i
i
i
.
Demand w .
Tax
atpoint B produced and demanded is less than
-
-
Q at A and has also a much
higher price at P2 .
Q2 Qn will also be
There a
deadweight loss .
④ Explain how the burden of a tax is divided
among buyers
and sellers .
Tax incidence is the manner in which the tax burden is divided between buyers and sellers .
When is more elastic than demand buyers bear most of the tax burden When demand is
supply , .
than of the cost of
more elastic supply, producers bear most the tax .
Tax revenue is
larger
the more inelastic the demand and
supply are .
③ what are the welfare effects of a tax ? Please use a
diagram to illustrate
your thoughts .
p
( w Tax)
'
s .
n
Tax welfare decrease
causes to ,
even
taking
into account the the S
gain in revenue
government consumer
surplus
from the tax
gets . pz . - - - - -
-
.
This decrease in welfare is
usually referred to i -
C Deadweight welfare loss
py
.
. . . - . .
. . .
. .
. ,
a dead weight loss due to the tax The dead
'
-
tax revenue .
.
Po -
.
- - - -
'
t
weight form of
/
loss due to an excise tax is a producer i
'
i D
surplus
economic
inefficiency .
i i
> Q
Q
⑤ consumer surplus Economic measurement of consumer benefits Happens when the =
.
Price paid for a product or service is less than the
price they are willing to pay .
Producer surplus much a person would be
Difference between how willing to accept
=
for given quantity of a
good versus how much
they can receive by selling it at market price .
Economic
efficiency when
all
goods and factors of production in an economy :
are distributed or allocated to their most valuable uses and waste is eliminated or minimized .
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller khushisampat. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $11.63. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53340 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now