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econ i2
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Tax
It drives a wedge between the price buyers pay and the price sellers receive
Tax Revenue
These can fund beneficial services such as education, roads, and infrastructures.
Dead Weight loss
It refers to the fall in total surplus that results from a market distortion
marginal tax rate
It refers to the tax on the last dollar of earnings: 40%
Tax on labor income
It’s the biggest source of government revenue.
Increases: rises
When tax __________ DWL ________
Laffer Curve
This shows the relationship between the size of the tax and tax revenue.
Higher
Higher elasticities mean ________ DWLs.