ECON 200 Chapter Notes - Chapter 20: Deadweight Loss, Income Tax, The Surplus
2 Mar 2015
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Document Summary
Revenue allows governments to provide goods and services to citizens. Many tax-funded programs are attended to increase surplus and stimulate economic growth. Others are intended to provide basic human needs. Ex. food, healthcare, housing to people in need. Taxes alter the incentives faced by market participants. Taxes drive a wedge between the price paid by buyers and the price. Results in a lower equilibrium quantity of the good or service being. Sometimes this effect on incentives is just a side effect of a ta designed to. Other times it is the explicit purpose of the policy designed partly to received by sellers consumed raise revenue reduce demand. Efficiency: how much (extra) will the tax cost? (efficiency effects) Costs and benefits of a tax are not just the cost that taxpayers pay and the benefit of the service provided using those funds. Taxes cause changes in economic behavior, potentially shifting supply and demand away from their optimal levels.
