Microeconomics Wk. 7

If a tax is imposed on a market with inelastic demand and elastic supply, then

buyers will bear most of the burden of the tax.

Total surplus with a tax is equal to

consumer surplus plus producer surplus plus tax revenue

The decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss

If the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase

A tax imposed on the buyers of a good will lower the

effective price received by sellers and lower the equilibrium quantity.

If the government removes a tax on a good, then the quantity of the good sold will

increase

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

increase by less than $1,000.

If the government levies a $5 tax per MP3 player on buyers of MP3 players, then the price paid by buyers of MP3 players would likely

increase by less than $5

A deadweight loss is a consequence of a tax on a good because the tax

induces buyers to consume less, and sellers to produce less

A tax imposed on the buyers of a good will raise the

price paid by buyers and lower the equilibrium quantity.

A tax imposed on the sellers of a good will raise the

price paid by buyers and lower the equilibrium quantity.

A tax imposed on the buyers of a good will

raise the price buyers pay and lower the effective price sellers receive

When a tax is levied on a good, the buyers and sellers of the good share the burden

regardless of how the tax is levied

When a tax is imposed on the sellers of a good, the supply curve shifts

upward by the amount of the tax.