01:220:102 Lecture Notes - Lecture 17: Paternalism, Social Cost, Consumer Sovereignty

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Barbara Crockett

Document Summary

Chapter 10: taxation & gov"t spending in u. s. Too much income inequality creates problems; can lead 2 disincentive 4 poor ppl who believe they won"t make it anyways: gov"t addresses equity issues through transfer payments & tax structure (progressive taxation) Tax incidence: who bears burden of tax: doesn"t matter whether we make consumers or producers pay tax; who pays tax depends on elasticity of their curves (inelastic pay tax; elastic don"t pay tax: there are other substitutes) !1: tax is split 50-50 in this situation b/c producers can just raise prices (however, it isn"t always 50-50 depends on how elastic & inelastic each curve is) If tax was on consumers instead: shift demand curve to the left (max willingness 2 pay for every unit falls by. ; amount paid to producers falls by b/c gov"t collects that : tax isn"t split 50-50.