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How is the tax burden shared when demand is relatively inelastic compared to supply?
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Consumers bear a larger share of the tax burden when demand is relatively inelastic compared to supply.
How was the impact of taxes on market equilibrium visually represented in class?
The impact of taxes was demonstrated through shifts in supply and demand curves in different scenarios of elasticity to show who bears the majority of the tax burden.
Explain the scenario where both demand and supply have equal elasticity in terms of tax incidence.
When both demand and supply are equally elastic, the tax burden is equally shared.
What is an excise tax and how does it impact the supply curve?
An excise tax is a per unit tax imposed on producers which shifts the supply curve to the left.
In what ways do taxes critically alter market dynamics according to the lecture?
Taxes critically alter market dynamics by influencing prices, consumer and producer behavior, and overall market efficiency.
How do taxes alter consumer and producer behavior in the market?
Taxes alter both consumer and producer behavior by changing prices, affecting surplus, and overall market efficiency.
In a situation where demand is more elastic than supply, who bears more of the tax burden?
Producers bear more of the tax burden when demand is more elastic than supply.
Define producer surplus and how it is influenced by taxes shifting the supply curve.
Producer surplus is the area above the supply curve and below the price line, which decreases when the supply curve shifts left due to tax.
When does the entire tax burden fall on producers based on elasticity of demand?
When demand is perfectly elastic, producers bear the entire tax.
When does the entire tax burden fall on consumers according to elasticity?
When demand is perfectly inelastic, consumers bear the entire tax burden.
What is deadweight loss in the context of a tax on a good?
Deadweight loss represents the loss of economic efficiency when the quantity of a good produced and consumed decreases due to a tax.
Why is understanding the concept of tax incidence based on elasticities crucial?
Understanding tax incidence based on elasticities helps in comprehending who bears the tax burden and the broader economic implications of taxation in markets.
Explain the concept of consumer surplus and how it is impacted by taxes.
Consumer surplus is the area below the demand curve and above the price line, which decreases as prices increase due to tax.
In the example of milk used in class, how did the excise tax affect the equilibrium price?
The price paid by consumers increased to $4, but not by the full amount of the tax ($5), demonstrating how the tax burden is shared.
What is the impact of an excise tax on the tax revenue collected by the government?
For milk, a tax resulted in $160 going to the government based on 80 units sold at a tax of $2 each.
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