Tuesday, February 27, 2007

Okay - some info for you -

Price ceilings & floors:
http://www.reffonomics.com/pricefloor.html

Taxes & elasticity:
http://www.reffonomics.com/excisetaxes.html

Tariff graph:
http://apecon.us/tradetariffefficiency.gif

Agree or disagree, and why?
1. If the government taxes land, wealthy landowners will pass the tax on to their poorer renters.
2. A tax that has no deadweight loss cannot raise any revenue for the government.
3. If the government taxes apartment buildings, wealthy landlords will pass the tax on to their poorer renters.
4. A tax that raises no revenue for the government cannot have any deadweight loss.




Suppose the government raises $100 million through a $0.01 tax on widgets, and another $100 million through a $0.10 tax on gadgets. If the government doubled the tax rate on widgets and eliminated the tax on gadgets, would it raise more, less, or the same amount of money as before?

12 comments:

Wojtek said...

#2 Disagree, if a tax would be introduced on a perfect inelastic good than there would be no dead weight loss. people would still buy as much as they did before the tax, but the government will also gain from it.

domino said...

#1. agree. if the government instates a tax on land, the owners of the land will try to alleviate the burden of the tax and make the same amount of income, therefore they will pass at least some of the tax on to their less wealthy patrons.

Kate said...

#1 Agree

I believe that human instinct makes us want to hold onto what we consider "ours". I agree with domino in the fact that they will pass the tax on to relieve the burden on themselves.

Kate said...

In response to the last question:

i think it would stay the same. well, i guess it depends on what widgets and gadgets do. If they do the same job, then yes it would raise the same...actually, no! if i'm going with the same theory i think it would be less because no one would buy widgets, if they could buy gadgets, which do the same, but cost less money...

or i could be TOTALLY off

Gina said...

#1 If the government creates a tax on land, the wealthy land owners will try to share the tax burden with the poorer renters. However, sice tax burdens fall more heavily on those who are less elastic, the land owners will bear the biggest burden of the tax. The renters have more options to rent from other places, and can't afford to pay a lot for rent. On the other hand, the land owner must pay the tax either way and has the money to.

rusch said...

3. If the government taxes apartment buildings, wealthy landlords will pass the tax on to their poorer renters.

agree. just like the landowners i think if the government taxed apartment buildings that the landlords would pass on the tax to the renters because even though they are the wealthier ones they are going to try to make up for what they can by taxing the renters. as well as lessening the burdon.....

nick_oehlrich said...

For the last question. IF people still bought the same amount as before with the new taxes then they would stay the same. But ebcause of the increase tax on widgets and no tax on gadgets, peopel could then buy less of widgets and more of gadgets which then would lessen...

D Mac said...

#4. theoretically, a tax could be so high that a government would not get any revenue from it, but there would be entirely dead weight loss instead of consumer and producer surplus.

however, i don't think that would ever happen, unless the government was trying to take the good off the market by taxing it to death because a good with a tax that high would end up having a QD of zero.

keri said...

1. I definitly agree with this statement. I mean, wealthy landowners are happy that they are wealthy, and they got that way by not paying for unnecessary costs. Tax is an unnecessary tax for wealthy landowners, when they know that they are holding land that SOMEONE will eventually buy. Therefore, they can pass the tax on to the person renting the land because eventually someone will pay the cost because htey want the land. Wealthy landowners want to stay wealthy landowners.

kfbare said...

For the last question I am going to stick with the theory from the book that taxing something will NOT produce additional revenue for the government. It makes sense because a higher tax on the widgets is going to make people less willing to buy them. And if the gadgets are available without a tax, consumers are going to be even more apt to avoid the widgets.

Dan said...

4. Disagree, any tax at all will harm the market balance and create a small portion of the graph that is dead weight loss.

KM said...

Hey, you guys are HOT! You're doing an excellent job with the taxing analysis.

For #2...if there is a perfectly inelastic demand, check the graph - how could there be rev or DWL?

The last one is a toughie, but you guys have a great spin on it - if they are substitutes (which it doesn't say, but you are putting it in that way, which is awesome) - the analysis is great!