【正文】 2020 Pearson AddisonWesley Tax Incidence and Elasticity of Demand The division of the tax between buyers and sellers depends on the elasticities of demand and supply. To see how, we look at 。 2020 Pearson AddisonWesley So, exactly as before when sellers were taxed: Buyers pay $ of the tax. Sellers pay the other 50162。 2020 Pearson AddisonWesley The price received by sellers falls to $ a pack and the quantity decreases. So with the tax of $ a pack, buyers pay $ a pack more and sellers receive 50162。 a pack less. Taxes 169。 2020 Pearson AddisonWesley A Tax on Sellers Figure shows the effects of this tax. With no tax, the equilibrium price is $ a pack. A tax on sellers of $ a pack is introduced. Supply decreases and the curve S + tax on sellers shows the new supply curve. Taxes 169。 2020 Pearson AddisonWesley Tax Incidence Tax incidence is the division of the burden of a tax between buyers and sellers. When an item is taxed, its price might rise by the full amount of the tax, by a lesser amount, or not at all. If the price rises by the full amount of the tax, buyers pay the tax. If the price rise by a lesser amount than the tax, buyers and sellers share the burden of the tax. If the price doesn’t rise at all, sellers pay the tax. Taxes 169。 2020 Pearson AddisonWesley Is the Minimum Wage Fair? A minimum wage rate in the United States is set by the federal government’s Fair Labor Standards Act. In 2020, the federal minimum wage rate was $ an hour. Some state governments have set minimum wages above the federal minimum wage rate. Most economists believe that minimum wage laws increase the unemployment rate of lowskilled younger workers. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley Inefficiency of a Minimum Wage A minimum wage leads to an inefficient oute. The quantity of labor employed is less than the efficient quantity. The supply of labor measures the marginal social cost of labor to workers (leisure fone). The demand for labor measures the marginal social benefit from labor (value of goods produced). Figure illustrates this inefficient oute. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley The equilibrium wage rate is $6 an hour. The minimum wage rate is set at $7 an hour. So the equilibrium wage rate is in the illegal region. The quantity of labor employed is the quantity demanded. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley A price floor is a regulation that makes it illegal to trade at a price lower than a specified level. When a price floor is applied to labor markets, it is called a minimum wage. If the minimum wage is set below the equilibrium wage rate, it has no effect. The market works as if there were no minimum wage. If the minimum wage is set above the equilibrium wage rate, it has powerful effects. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley Are Rent Ceilings Fair? According to the fair rules view, a rent ceiling is unfair because it blocks voluntary exchange. According to the fair results view, a rent ceiling is unfair because it does not generally benefit the poor. A rent ceiling decreases the quantity of housing and the scarce housing is allocated by ? Lottery ? Firste, firstserved ? Discrimination A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley Inefficiency of a Rent Ceiling A rent ceiling set below the equilibrium rent leads to an inefficient underproduction of housing services. The marginal social benefit from housing services exceeds its marginal social cost and a deadweight loss arises. Figure illustrates this inefficiency. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley Increased Search Activity The time spent looking for someone with whom to do business is called search activity. When a price is regulated and there is a shortage, search activity increases. Search activity is costly and the opportunity cost of housing equals its rent (regulated) plus the opportunity cost of the search activity (unregulated). Because the quantity of housing is less than the quantity in an unregulated market, the opportunity cost of housing exceeds the unregulated rent. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley At the rent ceiling, the quantity of housing demanded exceeds the quantity supplied. There is a shortage of housing. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley A price ceiling or price cap is a regulation that makes it illegal to charge a price higher than a specified level. When a price ceiling is applied to a housing market it is called a rent ceiling. If the rent ceiling is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling. But if the rent ceiling is set below the equilibrium rent, it has powerful effects. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley It’s Not Fair If the Rules Aren’t Fair The idea that ―it’s not fair if the rules aren’t fair‖ is based on the symmetry principle. Symmetry principle is the requirement that people in similar situations be treated similarly. Is the Competitive Market Fair? 169。 2020 Pearson AddisonWesley Figure shows how redistribution increases efficiency. Tom is poor and has a high marginal benefit of ine. Jerry is rich and has a low marginal benefit of ine. Taking dollars from Jerry and giving them to Tom until they have equal ines increases total benefit. Is the Competitive Market Fair? 169。 2020 Pearson AddisonWesley It’s Not Fair if the Result Isn’t Fair The idea that only equality brings efficiency is called utilitarianism. Utilitari