L2 Flashcards
What is consumer and producer surplus?
The market benefits to either consumers or producers
How is surplus mesured
As the difference between willingness to pay or possible revenue and the actual price or cost
What is vat tax
Value added tax is an often uniform tax on the purchase of a good or service
What is an income tax
An often progressive tax on income that gets larger with the income. It is often used for redistribution
What is capital tax
A tax on the return on capital that is used for redistribution
What is environmental tax
A tax designed to influence behavior to the benefit of the environment
What is the deadweight loss of tax
The net effect of the tax on consumer or producer surplus
What is tax incidence
Who actually pays the tax, if it is a tax in producers that than raise prices the consumer really pay a large portion if the reduced demand does not force the producers to give up surplus
If a tax is introduced and demand is inelastic what is the tax incidence
The buyer
If a tax is introduced and demand is elastic what is the tax incidence
Sellers
What is the effect on demand and price in the case of a price cap
Excess demand but higher consumer surplus
What are some negative effects of excess demand due to regulation
Increased demand and thus price on unregulated substitutes, the formation of black markets, decreased interest in supplying through regulated means
