The losers of this policy are all those harmed by the price floor CONSUMERS & PRODUCERS Solution: the would be willing to pay the the exact amount they gained from ‘losers’ ‘winners’ the intervention in exchange for cancelling the price floor Pareto Improving Transaction Taxation Unlike price ceiling/floor, a tax generates tax revenues Tax revenues can be used to redistribute wealth within a society Improves the distribution of Income & Opportunities across different population groups Say we tax producers Who the tax burden? Losers of this policy are: Consumers & producers (Price increases, Quantity decreases) Or Consumers (if D = inelastic OR S = perfectly elastic)
The losers of this policy are all those harmed by the price floor CONSUMERS & PRODUCERS Solution: the ‘losers’ would be willing to pay the ‘winners’ the exact amount they gained from the intervention in exchange for cancelling the price floor Pareto Improving Transaction Taxation Unlike price ceiling/floor, a tax generates tax revenues Tax revenues can be used to redistribute wealth within a society Improves the distribution of Income & Opportunities across different population groups Say we tax producers Who the tax burden? Losers of this policy are: Consumers & producers (Price increases, Quantity decreases) Or Consumers (if D = inelastic OR S = perfectly elastic)
ECON1010-Entire-Semester.docx