ECON 221 1st Edition Lecture 12 Outline of Last Lecture I. A Tax on BuyersII. The Incidence of TaxIII. Effects on TaxIV. Elasticity and Tax IncidenceOutline of Current LectureI. Deadweight LossII. Maximizing DWLIII. SubsidiesCurrent Lecture- With tax:o TS = CS + PS + TR- DWL = buyers lost in the market because of the tax (lost sales opportunity)- How can DWL be minimized? (all taxes create DWL)o Given same supply curve (flat) government is better off creating a tax where the demandcurve is more inelastic If demand is inelastic, then buyer’s cannot leave the market easily (not many ppeople will stop buying)- Subsidieso Subsidy to sellers S shifts right to S’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.o Subsidy to buyers D shifts right to D’o Who benefits more from subsidies?- If demand is elasticbigger burden of tax on sellers- If demand is elasticbigger benefit of subsidy on
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