《西方经济学》英文 版课件.ppt

C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 7.1 TAXES Tax Incidence Tax incidence The division of the burden of a tax between the buyer and the seller. If the price rises by the full amount of the tax, then the burden of the tax falls entirely on the buyer. If the price rises by a lesser amount than the tax, then the burden of the tax falls partly on the buyer and partly on the seller. If the price doesn’t change, then the burden of the tax falls entirely on the seller. 7.1 TAXES 1. With no tax, the price of a CD player is $100 and 5,000 CD players a week are bought. 7.1 TAXES 3. The price rises to $105—an increase of $5 a CD player. 7.1 TAXES 6. The government collects tax revenue of $20,000 a week—the purple rectangle. 7.1 TAXES Tax Incidence and Elasticities of Demand and Supply For a given elasticity of supply, the buyer pays a larger share of the tax the more inelastic is the demand for the good. For a given elasticity of demand, the seller pays a larger share of the tax the more inelastic is the supply of the good. 7.1 TAXES Tax Incidence and Elasticity of Demand Perfectly Inelastic Demand: Buyer Pays Entire Tax Perfectly Elastic Demand: Seller Pays Entire Tax Figures 7.2(a) and 7.2(b) illustrate these two extreme cases. 7.1 TAXES Figure 7.2(a) shows tax incidence in a market with perfectly inelastic demand—the market for insulin. 7.1 TAXES Figure 7.2(b) shows tax incidence in a market with perfectly elastic demand—the market for pink marker pens. 7.1 TAXES Tax Incidence and Elasticity of Supply Perfectly Inelastic Supply: Seller Pays Entire Tax Perfectly Elastic Supply: Buyer Pays Entire Tax Figures 7.2(c) and 7.2(d) illustrate these two extreme cases. 7.1 TAXES Figure 7.2(c) shows tax incidence in a market with perfectly inelastic supply—the market for spring water. 7.1 TAXES Figure 7.2(d) shows tax incidence in a market with perfectly elastic supply—the market for sand. 7.1 TAXES Taxes