ECON 2030 : Test 2
Document Summary
Incidence of taxation (burden: economic surplus something extra = benefit cost, engaging in market transaction, economic surplus is the entire amount extra. Benefit cost of market activity: es = benefit cost. Consumer surplus: benefit cost to buyer engaging in market transaction. Producer surplus: benefit cost to seller engaging in market transaction. Consumer surplus (buyer: benefit greater than or equal to cost, benefit is the reservation price and cost is the actual price, cs = reservation price actual price. Producer surplus (seller: benefit is greater than or equal to cost, benefit is the actual price and cost is the reservation price, ps = actual price reservation price. Economic surplus = reservation price (buyer) reservation price (seller: demand . More stuff being made need more workers. Price buyer pays price seller receives = amount of tax (total) (subtotal) benefit for government. Es = cs + ps + government revenue . % of tax borne by sellers = (elasticity demand/elasticity demand +