Chapter 7 & 8
buyers, sellers, & the government
A tax affects _________
raises the price buyers oay and lowers the price sellers receive
A tax on a good ______
buyers and sellers will share the burden of the tax
It does not matter whether a tax is levied on the buyers or the sellers of a good because _____________
producer surplus
Price - WTS =
consumer surplus
WTP - Price =
consumer surplus producer surplus tax revenue deadweight loss
Which tools help us evaluate hoe taxes affect economic well-being?
tax revenue
amount of tax x amount of good sold =
producer surplus
amount that producers benefit by selling a product at a market price that is higher than the least they would be willing to sell for
total surplus
consumer surplus + producer surplus + tax revenue =
tax revenue
how is a government's benefit from a tax measured?
consumer surplus
monetary gain obtained by consumers when the price that they pay is less than what they're willing to pay
-transfer resources from market participants to the government -alter incentives -distort market outcomes
taxes are costly to market participants because they
tax revenue
the money a government gains from the collection of taxes
total surplus decreases
what happens to the total surplus in a market when the government imposes a tax?
regardless of how the tax is levied
when a tax is levied on a good, the buyers and sellers of the good share the burden, ___________
loses some of the benefits of market efficiency
when teh government imposes taxes on the buyers or sellers of a good, society ________