taxes and subsidies

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  • Created by: ishah
  • Created on: 11-05-13 22:03
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  • taxes & subsidies
    • gov uses to correct market failure
      • social efficiency - no waste
    • tax - g&s - overvalued
      • tax indirect
    • subsidies
      • free market under-provide
    • MPC=MSC <- ideal
    • hard to judge how much to tax
    • indirect tax -variable costs ^
      • specific unit tax - parallel shift
    • ADvalorem tax
      • VAT - size of tax ^ with price
        • tilt pivot shift
    • burden of tax can be passed on consumer - PED
    • encourage production positive externalities
      • howev's whos winner&losers
        • subsidies may encourage inefficiency

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