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9 Cards in this Set
- Front
- Back
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TS=?
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CS+PS
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Free markets allocate their goods to the buyers who value them most highly as measured by their willingness to pay. THEY MAXIMIZE....PS OR CS?
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CS
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Free markets allocate the demand for goods to the sellers who can produce them at least cost. THEY MAXIMIZE PS OR CS
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PS
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Efficiency is lost if there are market failures caused by:
1. 2. |
1.The existence of “market power”, somebody has the ability to influence prices.
2.The existence of “externalities”: |
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Two Determinants of the Size of the Deadweightloss:
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Elasticity of D and S
Size of the Tax |
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Impact of Taxes:
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Tax Revenue and Deadweightloss
They raise the P paid by consumers They lower the money received by producers |
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DO TAXES REDUCE OR IMPROVE ECONOMIC ACTIVITY?
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reduce
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T = the size of the tax
Q = the quantity of the good sold GOV TAX REVENUE=? |
T x Q = the government’s tax revenue
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Deadweight loss
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the fall in total surplus that results from a market distortion, such as a tax.
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