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- 5. Figure 1 The Effects of a Tax Copyright © 2004 South-Western Quantity 0 Price Size of tax Price buyers pay Price sellers receive Demand Supply Price without tax Quantity without tax Quantity with tax
- 8. Figure 2 Tax Revenue Copyright © 2004 South-Western Quantity 0 Price Tax revenue ( T × Q) Size of tax ( T ) Quantity sold ( Q ) Demand Supply Quantity without tax Quantity with tax Price buyers pay Price sellers receive
- 9. Figure 3 How a Tax Effects Welfare Copyright © 2004 South-Western Quantity 0 Price A F B D C E Demand Supply = P B Q 2 = P S Price buyers pay Price sellers receive = P 1 Q 1 Price without tax
- 14. Figure 4 The Deadweight Loss Copyright © 2004 South-Western Quantity 0 Price Cost to sellers Value to buyers Size of tax Demand Supply Lost gains from trade Reduction in quantity due to the tax Price without tax Q 1 P B Q 2 P S
- 16. Figure 5 Tax Distortions and Elasticities Copyright © 2004 South-Western (a) Inelastic Supply Price 0 Quantity Demand Supply Size of tax When supply is relatively inelastic, the deadweight loss of a tax is small.
- 17. Figure 5 Tax Distortions and Elasticities Copyright © 2004 South-Western (b) Elastic Supply Price 0 Quantity Demand Supply Size of tax When supply is relatively elastic, the deadweight loss of a tax is large.
- 18. Figure 5 Tax Distortions and Elasticities Copyright © 2004 South-Western (c) Inelastic Demand Price 0 Quantity Demand Supply Size of tax When demand is relatively inelastic, the deadweight loss of a tax is small.
- 19. Figure 5 Tax Distortions and Elasticities Copyright © 2004 South-Western (d) Elastic Demand Price 0 Quantity Size of tax Demand Supply When demand is relatively elastic, the deadweight loss of a tax is large.
- 23. Figure 6 Deadweight Loss and Tax Revenue from Three Taxes of Different Sizes Copyright © 2004 South-Western Quantity 0 Price (a) Small Tax Tax revenue Demand Supply Q 1 Deadweight loss P B Q 2 P S
- 24. Figure 6 Deadweight Loss and Tax Revenue from Three Taxes of Different Sizes Copyright © 2004 South-Western Quantity 0 Price (b) Medium Tax Tax revenue P B Q 2 P S Supply Demand Q 1 Deadweight loss
- 25. Figure 6 Deadweight Loss and Tax Revenue from Three Taxes of Different Sizes Copyright © 2004 South-Western Quantity 0 Price (c) Large Tax Tax revenue Demand Supply Q 1 P B Q 2 P S Deadweight loss
- 27. Figure 7 How Deadweight Loss and Tax Revenue Vary with the Size of a Tax Copyright © 2004 South-Western (a) Deadweight Loss Deadweight Loss 0 Tax Size
- 28. Figure 7 How Deadweight Loss and Tax Revenue Vary with the Size of a Tax Copyright © 2004 South-Western (b) Revenue (the Laffer curve) Tax Revenue 0 Tax Size
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