Micro Unit 2.8 CW; Excise Tax and Elasticity (MS)

Given supply, the more inelastic the demand for a product, the larger the portion of an excise tax which is shifted forward to consumers.

Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax which is borne by producers.

The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax.

Economists agree that excise taxes are always shifted entirely to consumers by raising product prices.

Surpluses drive competitive prices up; shortages drive them down.

If demand increases and supply simultaneously decreases, equilibrium price will rise.

An increase in "quantity supplied" is caused by an increase in production costs.

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect upon equilibrium price will be indeterminate.

A government subsidy per unit of output increases supply.

Consumers buy more of normal goods as incomes rise.

Toothpaste and toothbrushes are substitute goods.

A government tax per unit of output reduces supply