EC120 Lecture Notes - Lecture 8: Deadweight Loss, Economic Surplus, Demand Curve
30
EC120 Full Course Notes
Verified Note
30 documents
Document Summary
When a tax is levied on buyers, the demand curve shifts downward by the size of the tax. When it is levied on sellers, the supply curve shifts upward by that amount. In either case, when the tax is enacted, the price paid by buyers rises and the price received by the sellers falls. Use welfare economics to measure the gains and losses from a tax on a good. To do this, we must take into account how the tac affects buyers, sellers, and the government. The benefit received by buyers in a market is measured by consumer surplus. The benefit received by sellers in a market is measured by producer surplus. To see how a tax affects welfare, we begin by considering welfare before the government has imposed a tax. D), the tax is said to impose a deadweight loss (are c + e)
