In 1990, Congress adopted a luxury tax to be paid by buyers of high-price cars, yachts, private airplanes, and jewelry. Proponents saw the levy as an effective means of taxing the rich. Critics pointed out that those bearing the hardship of a tax may or may not be the same as those who pay the tax (the point of tax incidence). Explain how the elasticity’s of supply and demand in competitive markets can have direct implications for the ability of buyers and sellers to shift the burden of taxes imposed upon them. Also explain how elasticity information has implications for the amount of social welfare lost due to the deadweight loss of taxation.
Answer to relevant QuestionsBoth employers and employees pay Social Security (FICA) on wage income. While the burden of this tax is designed to be borne equally by employers and employees, is a straight 50/50 sharing of the FICA tax burden likely? ...The local government in a West Coast college town is concerned about a recent explosion in apartment rental rates for students and other low-income renters. To combat the problem, a proposal has been made to institute rent ...Each year, about 9 billion bushels of corn are harvested in the United States. The average market price of corn is a little over $2 per bushel, but costs farmers about $3 per bushel. Tax payers make up the difference. Under ...Give an example of monopoly in the labor market. Discuss such a monopoly's effect on wage rates and on inflation.On May 12, 2000, the two daily newspapers in Denver, Colorado, filed an application with the U.S. Department of Justice for approval of a joint operating agreement. The application was filed by The E.W. Scripps Company, ...
Post your question