Economics 1021A/B Chapter Notes - Chapter 6: Price Ceiling, Deadweight Loss, Economic Equilibrium

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Michael Parkin

Document Summary

Equivalence of tax on buyers and sellers tax on buyers has the same effects as the tax on sellers. The employment insurance tax imposes on both buyers of labour and sellers of labour the market for labour, not the federal government, decides how the burden of the employment. Insurance tax is divided between firms and workers the division of the burden of a tax between buyers and sellers depends on the elasticities of demand and supply. Tax incidence and elasticity of demand perfectly inelastic demand- buyers pay perfectly elastic demand- sellers pay. Perfectly inelastic demand i. e. insulin add the tax to the minimum price at which companies are willing to sell new supply curve is s + tax price rises, but the quantity does not change. Tax incidence and elasticity of supply division of the tax between buyers and sellers also depends on the elasticity of supply perfectly inelastic supply- sellers pay perfectly elastic supply- buyers pay.