Commodity Taxes

Instructor: Tyler Cowen, George Mason University

In this video we cover taxes and tax revenue and subsidies on goods. We discuss commodity taxes, including who pays the tax and lost gains from trade, also called

In this video we cover taxes and tax revenue and subsidies on goods. We discuss commodity taxes, including who pays the tax and lost gains from trade, also called deadweight loss. We’ll take a look at the tax wedge and apply what we learn to the example of Social Security taxes.

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Yes, if elasticities are like that. But the supply of labor is not necessarily more elastic than demand for labor. Imagine that technology allowed demanders of labor (employers) to more easily substitute machines for labor. In that case the demand curve would be more elastic. Also imagine there was less welfare assistance for the unemployed and no minimum wage laws either. Supply of labor would be less elastic. Regarding spending, I would also count investment spending as spending. If business owners have more money to invest, they might invest it – spend it on future goods as it were. The problem in a depression is there is neither consumption nor investment spending.

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