The impact of tax on consumer and producer surplus and tax revenue.

Question

Want to see more full solutions like this?

Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

A health study tracked a group of persons for five years. At the beginning of the study, 20%were classified as heavy smokers, 30% as light smokers, and 50% as nonsmokers. Resultsof the study showed that light smokers were twice as likely as nonsmokers to die duringthe five-year study, but only half as likely as heavy smokers.A randomly selected participant from the study died during the five-year period. Calculatethe probability that the participant was a heavy smoker

Consider two assets with the following returns: State Prob. of state R₁ R2 1 23 13 25% 5% 2 -10% 1% Compute the optimal portfolio for an investor having a Bernoulli utility of net returns u(r) = 2√√r+ 10. Compute the certainty equivalent of the optimal portfolio. Do the results change if short-selling is not allowed? If so, how?

Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 6

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 7

Chapter 8, Problem 1QR

To determine

The impact of tax on consumer and producer surplus and tax revenue.

Answer 8

Expert Solution & Answer

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax which constitutes one-third of the total tax revenue of the government. The consumer surplus is the difference between the maximum price a person is willing to pay and the actual price he paid. Similarly, the producer surplus is the difference between the minimum price a producer is willing to accept and the actual price he received. The aggregate of these two surpluses is known as the economic surplus.

When there is a tax imposed on a commodity, the price of the commodity will increase because the price is the means through which the sellers transfer the impact of tax from them to the consumer. Thus, with the tax imposed on a commodity, the price of the commodity will increase and as a result, the price that the consumer pays will increase and the price that the producer receives declines. As a result, the decline in the consumer and the producer surplus will become more than the tax revenue collected by the government which will decline the total surplus of the economy. Thus, tax disincentives the buyers and sellers and as a result there will be inefficient allocation of resources in the economy.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax etc.

Consumer surplus: It is the difference between the highest willing price of the consumer and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest willing to accept price by the producer and the actual price received by the producer.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 12

Ch. 8.1 - Prob. 1QQ Ch. 8.2 - The demand for beer is more elastic than the...Ch. 8.3 - Prob. 3QQ Ch. 8 - Prob. 1QR Ch. 8 - Prob. 2QR Ch. 8 - Prob. 3QR Ch. 8 - Why do experts disagree about whether labor taxes...Ch. 8 - What happens to the deadweight loss and tax...Ch. 8 - Prob. 1QCMC Ch. 8 - Prob. 2QCMC

The impact of tax on consumer and producer surplus and tax revenue.

Solution Summary: The author explains the impact of tax on consumer and producer surplus and tax revenue.

The impact of tax on consumer and producer surplus and tax revenue.

Explanation of Solution

Want to see more full solutions like this?

Chapter 8 Solutions