Escolar Documentos
Profissional Documentos
Cultura Documentos
FOURTH EDITION
N. G R E G O R Y M A N K I W
PowerPoint Slides
by Ron Cronovich
2007 Thomson South-Western, all rights reserved
CHAPTER 8
CHAPTER 8
With no tax,
eqm price is PE
and quantity is QE .
Govt imposes a
tax of $T per unit.
The price buyers
pay is PB ,
Size of tax = $T
S
PB
PE
PS
QT
QE
Size of tax = $T
S
PB
PE
PS
QT
CHAPTER 8
QE
CHAPTER 8
Without a tax,
CS = A + B + C
PS = D + E + F
Tax revenue = 0
Total surplus
= CS + PS
=A+ B + C
+D+E+F
S
B
PE
C
E
D
QT
CHAPTER 8
QE
A
PB
S
B
D
C
E
PS
D
F
QT
QE
C + E is called the
deadweight loss
(DWL) of the tax,
the fall in total
surplus that
results from a
market distortion,
such as a tax.
A
PB
S
B
D
C
E
PS
D
F
QT
CHAPTER 8
QE
PB
PS
QT
QE
10
ACTIVE LEARNING
Analysis of tax
A. Compute
1:
B. If $100 tax
per ticket,
compute
CS, PS,
tax revenue,
total surplus,
and DWL.
Q
11
ACTIVE LEARNING
Answers to A
CS
= x $200 x 100
= $10,000
1:
PS
= x $200 x 100 P =
= $10,000
total surplus
= $10,000 + $10,000
= $20,000
Q
12
ACTIVE LEARNING
Answers to B
CS
= x $150 x 75
= $5,625
PB =
tax revenue
= $100 x 75
= $7,500
PS =
DWL = $1,250
A $100 tax on
airplane tickets
PS = $5,625
total surplus
= $18,750
1:
Q
13
14
P
S
Size
of tax
D
Q
CHAPTER 8
15
Size
of tax
D
Q
CHAPTER 8
16
P
S
Size
of tax
D
Q
CHAPTER 8
17
Size
of tax
D
Q
CHAPTER 8
18
CHAPTER 8
19
2:
Elasticity and DWL of a tax
ACTIVE LEARNING
20
ACTIVE LEARNING
Answers
2:
21
ACTIVE LEARNING
Answers
2:
22
ACTIVE LEARNING
Answers
2:
23
ACTIVE LEARNING
Discussion question
3:
24
25
CHAPTER 8
26
27
CHAPTER 8
28
new
DWL
S
2T
initial
DWL
Q2
CHAPTER 8
Q1
Q
29
new
DWL
S
3T
initial
DWL
Q3
CHAPTER 8
Q1
Q
30
Summary
DWL
Tax size
31
PB
PB
2T
PS
T
D
PS
Q2
CHAPTER 8
Q1
Q
32
When the
tax is larger,
increasing it
causes tax
revenue to fall.
3T
D
PS
PS
Q3
CHAPTER 8
2T
Q2
Q
33
Tax size
CHAPTER 8
34
CHAPTER SUMMARY
A tax on a good reduces the welfare of buyers and
sellers. This welfare loss usually exceeds the
revenue the tax raises for the govt.
35
CHAPTER SUMMARY
The price elasticities of demand and supply
measure how much buyers and sellers respond to
price changes. Therefore, higher elasticities imply
higher DWLs.
CHAPTER 8
36