Setting a price ceiling for a good (below the normal market price) results in an excess burden.
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Setting a price ceiling for a good (below the normal market price) results in an excess burden. Demonstrate this, by using supply and demand curves. In addition, show how the imposition of a tax on a substitute good, by affecting the demand for the good with a price ceiling, increases the excess burden (Hines, 1999: 180).
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The below diagram shows the effect of the price ceiling Point b gives the pr...View the full answer
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Related Book For
Public Finance In Canada
ISBN: 9781259030772
5th Canadian Edition
Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon
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