The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. q5-Why would this tax be both socially inefficient and inegalitarian? Use the concepts of deadweight loss and wealth inequality.
The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf.
q5-Why would this tax be both socially inefficient and inegalitarian? Use the concepts of
Deadweight loss: It refers to the cost which the society has to pay due to inefficiencies of the market which exists due to lack of supply and demand equilibrium. It is the excess burden which is the economic efficiency that is lost. This occurs due to lack of social optimal production of goods. The deadweight loss can be changed due to change in supply and demand of goods and services.
Step by step
Solved in 3 steps
