Chapter 8- Application: The Costs of Taxation Flashcards
When a tax is levied on buyers the demand curve shifts…
Downward by the size of the tax
When a tax is levied on the sellers the demand curve shifts…
Upward by the size of the tax
Tax places a wedge between the price buyers pay and…
the price sellers recieve
A tax on a good causes the size for the good to…
shrink
The government receives a total tax revenue of..
T (size of the tax) * Q (quantity)
Deadweight Loss
the fall in total surplus that results form a market distortion, such as a tax
Deadweight loss revisited
it is a loss to buyers and sellers in a market that is not offset by an increase in government revenue
The elasticity of supply affects the size of…
deadweight loss
A tax is considered a deadweight loss because…
It induces buyers and sellers to change their behaviors
The greater the elasticitiesof supply and demand…
the greater the deadweight loss of a tax
Taxes usually change over…
time
Supply-side economics
the belief that having lower taxes encourages people to work more and harder within the economy which then will increase the overall economy
Review lecture slide for details
it will be helpful
