Economics ECON S - 1920 Lecture Notes - Lecture 1: Deadweight Loss, Tax Incidence, Economic Surplus

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nicolk

15 Dec 2021

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Harvard University

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Economics

Course

Economics ECON S - 1920

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Economics chapter 10: taxation & regulation: tax incidence & deadweight loss. Tax incidence: refers to how the burden of the tax is distributed across various agents in economy. 4,000 plates & 6. 50 : tax of 2 on each plate, post-tax supply curve left shift, post-tax-equilibrium: > consumer surplus shrinks: tax revenue: 2 *2500 deadweight loss: yellow: tax incidence, consumers pay 1 more, producers gain 1 less. = 2 tax = 50/50 percent on each. 1. 2 tax on consumers: tax of 2 on each plate, post-tax demand curve left shift, post-tax-equilibrium: 50% & 50: tax of 2 on each plate, post-tax demand curve left shift, post-tax-equilibrium: Tax incidence & prices and quantities are independent of whether tax is imposed on buyer or seller. Demand curve is the same: more elastic (flatter) supply curve. Econ ch10: demand more elastic than supply, tax incidence equal on buyer & seller, 1. Supply curve is the same: more elastic (flatter) demand curve.

Related Questions

What are deadweight losses, and what are their causes?

What are the market effects of a deadweight loss?

What are the major factors that determine who will bear the burden of a tax or the incidence of a tax?

If the government uses taxation to deal with a situation, how would the various elasticities of supply and demand affect the deadweight loss of that tax? Explain using examples.

If the government proposes the use of cap and tax programs to deal with deadweight losses, how would they work?

beigeguinea-pig498

Politicians concerned with climate change are proposing that a tax on electricity should be implemented with the hope that it will incentivize energy abatement. But they are also want to structure a policy such that it is the producers of electricity that pay the tax, not the consumers. Therefore, they propose a tax of $1/MW h to be paid by the generator of electricity. You have been hired to assess the economic implications of the proposed tax.

After running your econometric modeling, you conclude that the market for electricity is characterized by the following equations:

Demand Curve: P = 40 - 3Qd

Supply Curve: P = Qs

Where P is dollars per MWh and Q is Millions of MWhs.

Part 1: What are the equilibrium price (P) and quantity (Q) with no tax assessed?

Part 2: What will be the equilibrium quantity after the tax is assessed? What is the price that the consumer will pay after the tax is assessed? What is the price that the producer will receive after the tax is assessed?

Part 3: Was the politician successful in reducing electricity usage? If so, by how much?

Part 4: How much tax revenues are raised by the new tax?

Part 5: What is the tax incidence to the consumers?

Part 6: What is the tax incidence to the producers?

Part 7: Was the policymaker successful in assessing the tax on producers, not consumers?

mauvedinosaur490

Suppose the market for cigarettes is characterized by the followinginformation:
Qd = 70 - 5P [Demand] Qs = 3P - 10 [Supply]
Suppose the government imposes a sales tax of $2 per unit.
i) Calculate the magnitude of the consumer surplus and producersurplus in the pre-tax equilibrium.
ii) Calculate the tax revenue in the post-tax equilibrium.
iii) Calculate the change in consumer surplus due to the salestax.
iv) Calculate the change in producer surplus due to the salestax.
v) Calculate the Dead-Weight-Loss due to the sales tax.
[Note: P = price per unit; Qd = thousands of units demanded; Qs =thousands of units supplied]

amaranthporcupine607

Economics ECON S - 1920 Lecture Notes - Lecture 1: Deadweight Loss, Tax Incidence, Economic Surplus

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