mposed by government on the sales of goods and services Ad valorem per-unit Goods are taxed at a pre-set percentage of its value .g. sales tax of 60% imposed n wine sold in HK Goods are taxed according to its quantity transacted e.g. sales tax of $0.735 impo on a cigarette sold in HK What is sales tax? What is sales tax?
¦ imposed by government on the sales of goods and services Ad valoremper-unit Goods are taxed at a pre-set percentage of its value e.g. sales tax of 60%
Dec 14, 2015
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imposed by government on the sales of goods and services
Ad valorem per-unit
Goods are taxed at a pre-setpercentage of its value
e.g. sales tax of 60% imposedon wine sold in HK
Goods are taxed according toits quantity transacted
e.g. sales tax of $0.735 imposedon a cigarette sold in HK
What is sales tax?What is sales tax?
Totaltax
burden
per-unitper-unittaxtax
Consumers’Consumers’tax burdentax burden
Producers’Producers’tax burdentax burden
P1P2
Q1Q
0
P($) Total tax burden= Per-unit tax x _____ Quantity transacted
Q2
Consumers’ tax burden= change in price x ______ Quantity transacted
Producers’ tax burden= the remaining amountConsumers’ burden ____ Producers’ burden (Ed ____ Es)
new
new
<>
S1S2
Sales tax with Sales tax with elastic demandelastic demand and and inelastic inelastic supplysupply
[i.e. Ed[i.e. Ed 1 , Es 1 , Es 1] 1]
D
> <
Totaltax
burden
per-unitper-unittaxtax
Consumers’Consumers’tax burdentax burden
Producers’Producers’tax burdentax burden
P1
P2
Q1
Total tax burden= Per-unit tax x _____ Quantity transacted Consumers’ tax burden= change in price x ______ Quantity transacted
Producers’ tax burden= the remaining amountConsumers’ burden _____Producers’ burden Ed ___Es
new
new
><
Sales tax with Sales tax with inelastic demandinelastic demand and and elastic elastic supply supply
[i.e. Ed [i.e. Ed 1 , Es 1 , Es 1] 1] 家華家華
S1
S2
Q2
DQ
0
P($)
< >
Before imposition of Before imposition of sales taxsales tax
P ($) Qd Qs
100 200 140
110 190 160
120 180 180
130 170 200
140 160 220
150 150 240
160 140 260
P1= =Q1=
After imposition of After imposition of sales taxsales tax
P ($) Qd Old Qs New Qs
100 200 140
110 190 160
120 180 180
130 170 200
140 160 220
150 150 240
160 140 260
---
---
---
Per-unit tax = $30
P2= =Q2
Consumers’ tax burden =
$20 x 160$3200
Total tax burden=
$30 x 160$4800
Producers’ tax burden =
$4800 - $3200$1600160
180200
P1= =Q1=
140
Ed Es<
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