Application The Costs of taxation Chapter 8 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of t work should be mailed to Permissions Department, Harcourt College Publishers 6277 Sea Harbor Drive. Orlando Florida 32887-6777
Application: The Costs of Taxation Chapter 8 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
The Costs of taxation How do taxes affect the economic wel- being of market participants H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Costs of Taxation How do taxes affect the economic well- being of market participants?
The Costs of taxation It does not matter whether a tax on a good is levied on buyers or sellers of the good... the price paid by buyers rises, and the price received by sellers falls H arc Inc items and derived items copyright C 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Costs of Taxation It does not matter whether a tax on a good is levied on buyers or sellers of the good…the price paid by buyers rises, and the price received by sellers falls
The effects of a tax Price Supply Price buyers Size of tax pay rice 0n0nnnnggnnnnnUdDI without tax Price sellers receive Demand Quantity Quantity Quantity with tax without tax Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Effects of a Tax... Price 0 Quantity Quantity without tax Supply Demand Price without tax Price buyers pay Quantity with tax Size of tax Price sellers receive
The effects of a tax . A tax places a wedge between the price buyers pay and the price sellers receive. o Because of this tax wedge, the quantity sold falls below the level that would be sold without a tax o The size of the market for that good shrinks H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Effects of a Tax uA tax places a wedge between the price buyers pay and the price sellers receive. uBecause of this tax wedge, the quantity sold falls below the level that would be sold without a tax. uThe size of the market for that good shrinks