ECON 1101 1st Edition Lecture 11 Outline of Last Lecture II First Welfare Theorem III Adam Smith Theorem IV Taxes Outline of Current Lecture I II Tax Burden Welfare analysis a Allocation with Tax Current Lecture Tax Burden Do buyers and sellers always split taxes 50 50 No When it is elastic the consumer pays more When it is perfectly inelastic the suppliers pay the tax and have the tax burden The more inelastic of the side you are on the more you pay When it is inelastic you are influenced less by product tax because you need the good Welfare Analysis How Consumer surplus Producer surplus and total surplus changes with tax When government takes a tax we lose surplus and make a dead weight loss DWL because there are less consumers Allocation with tax IS NOT Pareto efficient It does not maximize the pie because of DWL Without the tax the market is efficient The source of inefficiency General Principle 3 Quantity Efficiency does not hold true General Principle 1 and 2 hold true These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Alternatives Tax HEADS instead of WIDGETS Taxes that distort decision changes the social pie taxes that don t distort decision do not
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