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5 Cards in this Set
- Front
- Back
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The Effects of a Tax |
A tax on a good places a wedge between the price that buyers pay and the price that sellers receive while the quantity of the good sold falls |
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Tax Revenue |
The tax revenue that the government collects equals T x Q (size of the tax times the quantity). Thus, tax revenue equals the area of the rectangle between the supply/demand curves |
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Deadweight Loss |
The fall in total surplus that results from a market distortion, such as a tax |
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Underground Economy |
engaging in illegal economic activity, such as the drug trade, or working jobs that pay under the table to avoid taxes |
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Laffer Curve |
The relationship between tax revenue (y-axis) and tax size (x-axis) |
