week6

Question 1

Progressive tax

Answer 1

Takes a larger share of the income of high-income taxpayers than that of low-income taxpayers

Question 2

Regressive tax

Answer 2

Takes a smaller share of the income of high-income taxpayers than that of low-income taxpayers

Question 3

3 rules of tax incidence

Answer 3

• 1. The statutory burden of a tax doesn’t describe who really bears the tax
     -2. The side of the market on which the tax is imposed is irrelevant to the distribution of the tax burdens
     -3. Parties with inelastic supply or demand bear taxes; parties with elastic supply or demand avoid them

Question 4

Consumer tax burden

Answer 4

(New price - Price paid before) + per unit tax payments by consumers

Question 5

Producer tax burden

Answer 5

(Price received now - Price received before) + per unit tax payments by producers

Question 6

Tax wedge

Answer 6

The difference between what consumers pay and what producers receive (net of tax) from a transaction
Consumer burden + producer burden