TAX INCIDENCE & ELASTICITY Flashcards
1
Q
Who bears more tax burden — elastic or inelastic side?
A
The inelastic side.
2
Q
What does a unit tax do to the supply curve?
A
Shifts it up vertically by the tax amount.
3
Q
What is deadweight loss (DWL)?
A
Lost surplus from reduced trade due to tax or monopoly pricing.
4
Q
What is the purpose of Groves-Clarke tax?
A
o induce truthful demand revelation in public good provision.
5
Q
Who pays the tax?
A
Only the pivotal agent — the one whose report changes the provision decision.
6
Q
A
