ECON 1101 1st Edition Lecture 11Outline of Last Lecture II. First Welfare TheoremIII. Adam Smith Theorem IV. Taxes Outline of Current Lecture I. Tax BurdenII. Welfare analysisa. Allocation with TaxCurrent LectureTax BurdenDo 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 AnalysisHow Consumer surplus, Producer surplus, and total surplus changes with taxWhen 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 WIDGETSTaxes that distort decision changes the social pie, taxes that don’t distort decision do
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