Effects of Taxes on Sale of Goods:
An important application of our theory is to tax incidence, i.e., how the burden of a tax on goods is shared by producers and consumers. We will see that this depends on the relative sizes of the price elasticity’s of supply and demand.
A specific tax is a tax expressed in absolute amounts of money per unit of goods sold (or bought), for example a tax on a bottle of beer may be τ = 1kr. An ad valorem tax is a tax expressed as a fraction, α, (or percentage) of the price, the value added tax is such a tax. If the price (including the tax) that consumer’s pay is p, the price that suppliers receive is: ps=(1 − α).p, the tax revenue, per unit sold, is therefore T = α . p. In the case of a specific tax the price that suppliers receive is ps = p − τ.
Any tax, whether specific or ad valorem, is determined by a political authority (democratic or autocratic as the case may be) and can therefore be considered to be exogenous, or an environmental variable which cannot be controlled by either side of the market. In practice taxes are paid by suppliers (because this is much more efficient than if consumers were required to pay them), and we can therefore think of taxes as a factor which shifts down the supply curve, or shifts up the inverse supply curve. From the suppliers point of view it is just another cost of supplying a good, a fee that must be paid to the tax authority. Returning to our old supply function for a liter of beer, we now write it as:
QS = 20 + 3p − τ
The inverse supply curve now becomes,
Hence, the slope of the supply curve is the same, but it has shifted up by the (specific) tax.
If the specific beer tax is τ = 2kr, the direct supply curve will shift down to Q′S = 18+3. p, and we have already solved such a case and found that the price increases to p′ = 10.4 (and quantity demanded decreases to Q′D = 49.2. The price that beer suppliers receive is p′s = 8.4 and tax revenue is T = 49.2 x 2 = 98.4
Latest technology based Economics Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Intermediate Microeconomics homework help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Intermediate Microeconomics, project ideas and tutorials. We provide email based Intermediate Microeconomics homework help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Intermediate Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Economics homework help and assignment help services. They use their experience, as they have solved thousands of the Economics assignments, which may help you to solve your complex issues of Intermediate Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
tutorsglobe.com respiratory quotient assignment help-homework help by online respiration tutors
tutorsglobe.com fluorescence microscope assignment help-homework help by online microscopy tutors
tutorsglobe.com american foreign policy assignment help-homework help by online history tutors
Growlers are also given with meters (ammeter/milli-volt) on the panel with variable resistance.
Infrared Spectroscopy tutorial all along with the key concepts of Types of Vibrations, Correlation of structure and frequency, IR Spectroscopy Experimental Procedure, Measuring IR absorption bands, Beer's law, Determination of Concentration of Cyclohexane Using IR Spectroscopy
tutorsglobe.com spermatophytes assignment help-homework help by online biodiversity tutors
tutorsglobe.com algae in industry assignment help-homework help by online economic importance of algae tutors
www.tutorsglobe.com offers Requirement Analysis Tasks homework help, assignment help, case study, writing homework help, online tutoring assistance by computer science tutors.
tutorsglobe.com physiological role and deficiency symptoms assignment help-homework help by online mineral nutrition tutors
www.tutorsglobe.com offers online mechanical engineering assignment help - mechanical engineering homework help, projects help, coursework help, online tutoring and answering questions to mechanical engineering by tutors.
tutorsglobe.com le chateliers principle assignment help-homework help by online chemical equilibrium tutors
Reproduction in Algae-Life Cycles tutorial all along with the key concepts of Chlamydomonas, Life Cycle of Chlamydomonas, Ulothrix, Life Cycle of Ulothrix, Ulva, Laminaria, Life Cycle in Laminaria, Fucus, Life Cycle of Fucus
Theory and lecture notes of Lower degree of consistency all along with the key concepts of lower degree of consistency, lock management, Lock granularity. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Lower degree of consistency.
tutorsglobe.com stages of short-run law assignment help-homework help by online classification of production function tutors
Polysaccharides tutorial all along with the key concepts of Use of Polysaccharides, kinds of Polysaccharides, Structural Polysaccharides, Bacterial polysaccharides, Polysaccharides processed in our Body, Dietary Fiber and Ganoderma Polysaccharide
1952666
Questions Asked
3689
Tutors
1471521
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!