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Terms in this set (13)
the manner in which the burden of a tax is shared among participants in a market (buyers and sellers)
gov. tax on the purchase of a good or service
general consumption tax
consumption tax applied to almost all goods ( sales tax, use tax, VAT, etc.)
excise/ selective tax
tax for specific goods (ex: hotel tax, luxury taxes, airport taxes, sin taxes on tobacco and alcohol, tourist taxes)
whoever is more inelastic has the greatest burden
Part of the tax that consumers pay - price rises.
Part of tax that producers pay - price stays.
tax burden assumed by those paying the tax. Stated in the tax law. AKA statutory incidence.
tax burden assumed by those suffering from economic loss as a result of the tax incidence.
income elasticity of demand
How sensitive demand for a
good is to changes in income.
interpretation of YED
• Income elastic (YED > 1) or
income inelastic (YED < 1)
• Normal good (YED > 0) or
Inferior good (YED < 0)
Cross Elasticity of Demand
How "linked" the demand
of two goods is
Interpretation of CED
CED > 0 means substitutes
CED < 0 means complements
CED = 0 means unrelated
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