PRINCIPLES OF MACROECONOMICS
Text: Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition.
Instructor: Sue Guzek, ...
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TAX DISTORTION AND ELASTICITY
5
The more elastic
the supply, the
larger the
deadweight loss
of tax
DEADWEIGHT LOSS AND LABOR
6
Is supply of labor elastic??? Or inelastic???
If labor supply is Elastic,
then increase in tax...
DEADWEIGHT LOSS AND TAX REVENUE
7
Small tax = Small
Revenue
Larger tax = More
Revenue
Very Large Tax = Reduced
Revenue
LAFFER CURVE – WHAT DOES IT REALLY LOOK LIKE?
8
IS IT THIS…
Or This???
OR THIS???
TERMS AND CONCEPTS
 Deadweight Loss
 Laffer Curve
9
SOURCES
Principles of Macroeconomics, N. Gregory
Mankiw, Sixth Edition: PowerPoint Slides
prepared by: Andreea CHIRITESCU,...
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Slides for chapter 8 application costs of taxation

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Slides for chapter 8 application costs of taxation

  1. 1. PRINCIPLES OF MACROECONOMICS Text: Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition. Instructor: Sue Guzek, Kansas State University Salina Music: We Gonna Make You… By Troy “Trombone Shorty” Andrews and Orleans Avenue – Orleans and Claiborne 1 APPLICATION: INTERNATIONAL TRADE
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  4. 4. ‹#›
  5. 5. TAX DISTORTION AND ELASTICITY 5 The more elastic the supply, the larger the deadweight loss of tax
  6. 6. DEADWEIGHT LOSS AND LABOR 6 Is supply of labor elastic??? Or inelastic??? If labor supply is Elastic, then increase in taxes will cause more people to decrease their working hours If labor supply is INelastic, then increase in taxes will have little impact on supply of labor
  7. 7. DEADWEIGHT LOSS AND TAX REVENUE 7 Small tax = Small Revenue Larger tax = More Revenue Very Large Tax = Reduced Revenue
  8. 8. LAFFER CURVE – WHAT DOES IT REALLY LOOK LIKE? 8 IS IT THIS… Or This??? OR THIS???
  9. 9. TERMS AND CONCEPTS  Deadweight Loss  Laffer Curve 9
  10. 10. SOURCES Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition: PowerPoint Slides prepared by: Andreea CHIRITESCU, Eastern Illinois University 10

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