1. Define Excise Tax Per unit tax on production =

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Presentation transcript:

1. Define Excise Tax Per unit tax on production = Increase in marginal cost Increase cost of producing each additional good

2. What are the two goals of issuing an excise tax ? Increase tax revenue Decrease consumption of…. (harmful) Common Example – tobacco

4. D is perfectly inelastic and a tax is placed on suppliers. Were the goals of the excise tax met? Revenue? Decrease Consumption? The burden of this tax falls on?

5. D is perfectly elastic and a tax is placed on suppliers. Were the goals of the excise tax met? Revenue? Decrease Consumption? The burden of this tax falls on?

6. S is perfectly inelastic and a tax is placed on buyers. Were the goals of the excise tax met? Revenue? Decrease Consumption? The burden of this tax falls on?

7. S is perfectly elastic and a tax is placed on buyers. Were the goals of the excise tax met? Revenue? Decrease Consumption? The burden of this tax falls on?

8. What is the goal of placing a subsidy on a good? Can increase or decrease production But goal is to benefit society Decreases the marginal cost

One Example: want to increase the production- so provide incentive with subsidy to the producers ….= increased Q with lower prices …the additional costs of production are covered by the subsidy