lecture presentation excise tax
TRANSCRIPT
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7/29/2019 Lecture Presentation Excise Tax
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Excise Tax
And Allocative Efficiency
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Effect of a $.15 Excise Tax
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
Quantity SupplyPrice
BeforeTax
SupplyPrice
After Tax
50 $.10
100 .15
150 .20
200 .25
250 .30
300 .35
100 150 200 250 30050
S
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Effect of a $.15 Excise Tax
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
Quantity Supply Price
Before Tax
Supply
Price
After Tax
50 $.10 .25
100 .15 .30
150 .20 .35
200 .25 .40
250 .30 .45
300 .35 .50
100 150 200 250 30050
S
S1
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Suppose the elasticity of demand for thegood is similar to the elasticity of supply
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
S
D
What is the equilibriumprice?
What is the equilibriumquantity?
What is the consumer
surplus at equilibrium?
What is the producersurplus at equilibrium?
Assuming this is acompetitive market, Inwhat way is thisefficient?
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Now lets put that tax in place
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
S
D
What is the newequilibrium price?
What is the newequilibrium quantity?
What is the consumer
surplus at the newequilibrium?
What is the producersurplus at the newequilibrium?
Assuming this is acompetitive market, Inwhat way is thisefficient?
S1
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Deadweight loss to society
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
S
D
What is the newequilibrium price?
What is the newequilibrium quantity?
What is the new
equilibrium price paid byconsumers?
What is the newequilibrium price paid toproducers?
What is the revenuegenerated for thegovernment?
S1
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Part B
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
S
Who bears theburden of the taxwhen demand ismore elastic than
supply? (supply ismore inelastic
than demand?)
D
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Part B
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
S
Who bears theburden of the taxwhen demand ismore elastic than
supply? (supply ismore inelastic
than demand?)
S1
D
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Part C
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
DWho bears theburden of the taxwhen demand isperfectly
inelastic?
What about a pricefloor or ceiling?
S
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Part C
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
DWho bears theburden of the taxwhen demand isperfectly
inelastic?
What about a pricefloor or ceiling?
S
S1
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7/29/2019 Lecture Presentation Excise Tax
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Part D
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
D
Who bears theburden of the taxwhen demand isperfectly elastic?
What about a pricefloor or ceiling?
S
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Part D
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
D
Who bears theburden of the taxwhen demand isperfectly elastic?
What about a pricefloor or ceiling?
S
S1
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Effect of a $.15 Excise Tax
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
SWho bears theburden of the taxwhen supply isperfectly
inelastic?
What about a pricefloor or ceiling?D
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Effect of a $.15 Excise Tax
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
SWho bears theburden of the taxwhen supply isperfectly
inelastic?
What about a pricefloor or ceiling?D
S1
P
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Effect of a price ceiling or floor?
.10
.05
.20
.15
.50
.45
.40
.35
.30
.25
100 150 200 250 30050
SWho bears theburden of the taxwhen supply isperfectly
inelastic?
What about a pricefloor or ceiling?D
P