Term
Income Tax
Property Tax
Sales Tax
Tariffs
Excise/Luxury Tax
Social Security Taxes |
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Definition
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Term
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Definition
| Administrative costs and loss of consumer and producer surplus (Dead Weight Loss). |
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Definition
Provides a stable set of institutions and rules.
Provides public goods.
Adjust for undesired market results. |
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Definition
| Market price minus the amount that must be paid to provide the good. |
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Definition
| Amount you are willing to pay minus the amount that you actually must pay. |
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Definition
| Excess burden or allocative inefficiency. Is a loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable. When people drop out of the market. |
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Term
| Two Principles of Taxation |
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Definition
Benefit Principle
Ability to pay Principle |
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Definition
| The individuals who receive the benefit of a good or service should pay the tax necessary to supply that good. |
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| The Ability to Pay Principle |
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Definition
| The individuals who are the most able to bear the burden of the tax should pay the tax. |
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Definition
| Who is turning the tax into the government. |
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| Economic Incidence of a Tax |
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Definition
| Who bears the burden of the tax. |
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Definition
| A measure that indicates the degree of consumer response to a price change. |
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Definition
| Measures producers response to a price change. *Never negative. |
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Term
| Cross Price Elasticity of Demand |
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Definition
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Term
| Cross Price Elasticity of Supply |
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Definition
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Definition
| How demand changes in response to a change in income. |
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Definition
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Definition
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Definition
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Definition
As price increases total revenue decreases.
As price decreases total revenue increases.
|Ed|>1 |
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Definition
As price increases total revenue increases.
As price decreases total revenue decreases.
|Ed|<1 |
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| Unitary Elasticity of Total Revenue |
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Definition
As price changes total revenue remains the same.
|Ed|=1 |
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Definition
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Definition
| X=Cross Price Elasticity of Demand/Supply |
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Term
Cross Price Elasticity of Demand
Xd>0 |
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Definition
| As the price of the related goods rises, the quantity of X demanded increases. (Substitutes in Consumption) |
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Term
Cross Price Elasticity of Demand
Xd<0 |
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Definition
| As the price of related goods rises, the quantity of X demanded decreases. (Compliments in Consumption) |
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Term
Income Elasticity of Demand
Yd>0 |
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Definition
| As Y increases, Q increases (Normal Good) |
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Term
Income Elasticity of Demand
Yd<0 |
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Definition
| As Y increases, Q decreases (Inferior Good) |
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Term
Cross Price Elasticity of Supply
Xs>0 |
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Definition
| As the price of the related good rises, the quantity supplied of X increases. (Compliments in Production) |
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Term
Cross Price Elasticity of Supply
Xs<0 |
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Definition
| As the price of related goods rises, the quantity supplied of X decreases. (Substitutes in Production) |
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Term
| Determinants of Elasticity |
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Definition
1.As number of available substitutes rises, demand becomes more elastic.
The longer the period of time that buyers have to adjust to a price change, the more elastic the demand for a good becomes. |
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Term
| Determinants of Elasticity |
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Definition
| The more specific the classification for a good, the more elastic the demand is. |
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Term
| Determinants of Elasticity |
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Definition
| The longer the period of time that buyers have to adjust to a price change, the more elastic the demand for a good becomes. (The passage of time) |
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| Determinants of Elasticity |
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Definition
| The more the good is a necessity rather than a luxury, the more elastic demand will be. |
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| Determinants of Elasticity |
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Definition
| The greater the share of ones budget devoted to a good, the greater the price elasticity of demand for that good. |
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Definition
| Price rises by one cent so consumers bear full burden. |
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Term
| Perfectly Inelastic Supply |
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Definition
| Producers bear the full burden of the tax. |
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Term
| Perfectly Inelastic Demand |
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Definition
| Consumer gets full burden. |
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Term
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Definition
| Seller bears full burden of the tax. (Inefficient because a quantity change)(Losing producer surplus) |
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