BSB113 Lecture Notes - Lecture 4: Tax Incidence, Economic Efficiency, Marginal Cost
Document Summary
Working through theory to application, problem and applications questions, consumer surplus and producer surplus: question 1. 9. To drive a taxi legally in melb you must have a licence issues by the state government. Assume that this puts an absolute limit on any day, because no one breaks the law by driving a taxi without a licence. Also assume that each taxi rides is fixed at 3000 (or six rides per taxi when there are. With licence, price at demand at 3000. Indicate on the graph the areas representing consumer surplus and producer surplus if there were no licence requirement. The large triangle to the left of equilibrium. Consumer surplus top half, producer surplus bottom half: indicate on the graph the areas representing consumer surplus, producer surplus and deadweight loss with the licence requirement. C statement: a lower price in the market always increases economic efficiency in the market".
