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    AP Micro 2-6 Excise Taxes

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    ARIN
    1) Excise taxes are per-unit taxes imposed on producers for each unit produced. The goal is to reduce production of goods deemed dangerous or unwanted, such as cigarettes. 2) The excise tax is shown graphically as a vertical distance between the supply curve with the tax (STax) and the original supply curve (S). 3) The tax causes a reduction in quantity produced from the pre-tax equilibrium and a rise in price for consumers from the pre-tax price. Consumers pay the higher after-tax price while producers receive the lower pre-tax price.

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    AP Micro 2-6 Excise Taxes

    Uploaded by

    ARIN
    47 views12 pages
    1) Excise taxes are per-unit taxes imposed on producers for each unit produced. The goal is to reduce production of goods deemed dangerous or unwanted, such as cigarettes. 2) The excise tax is shown graphically as a vertical distance between the supply curve with the tax (STax) and the original supply curve (S). 3) The tax causes a reduction in quantity produced from the pre-tax equilibrium and a rise in price for consumers from the pre-tax price. Consumers pay the higher after-tax price while producers receive the lower pre-tax price.

    Original Title

    AP Micro 2-6 Excise Taxes (2)

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    1) Excise taxes are per-unit taxes imposed on producers for each unit produced. The goal is to reduce production of goods deemed dangerous or unwanted, such as cigarettes. 2) The excise tax is shown graphically as a vertical distance between the supply curve with the tax (STax) and the original supply curve (S). 3) The tax causes a reduction in quantity produced from the pre-tax equilibrium and a rise in price for consumers from the pre-tax price. Consumers pay the higher after-tax price while producers receive the lower pre-tax price.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    47 views12 pages

    AP Micro 2-6 Excise Taxes

    Uploaded by

    ARIN
    1) Excise taxes are per-unit taxes imposed on producers for each unit produced. The goal is to reduce production of goods deemed dangerous or unwanted, such as cigarettes. 2) The excise tax is shown graphically as a vertical distance between the supply curve with the tax (STax) and the original supply curve (S). 3) The tax causes a reduction in quantity produced from the pre-tax equilibrium and a rise in price for consumers from the pre-tax price. Consumers pay the higher after-tax price while producers receive the lower pre-tax price.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 12

    Unit 2: Supply, Demand,

    and Consumer Choice

    1
    #4 Excise Taxes
    Excise Tax = A per unit tax on producers
    For every unit made, the producer must pay $$$
    NOT a Lump Sum (one time only)Tax
    The goal is for them to make less of the goods that
    the government deems dangerous or unwanted.
    Ex:
    •Cigarettes “sin tax”
    •Alcohol “sin tax”
    •Tariffs on imported goods
    •Environmentally Unsafe Products
    •Etc.
    2
    Excise Taxes
    Supply Government sets a $2 per
    Schedule unit tax on Cigarettes
    P
    P Qs $5 S

    $5 140 4 CS
    $4 120
    3
    $3 100
    PS
    2
    $2 80
    $1 60 1
    D

    o 40 60 80 100 120 140 Q 3


    Excise Taxes
    Supply Government sets a $2 per
    Schedule unit tax on Cigarettes
    P
    P Qs $5 S

    $5 $7 140 4 CS
    $4 $6 120
    3
    $3 $5 100
    PS
    2
    $2 $4 80
    $1 $3 60 1
    D

    o 40 60 80 100 120 140 Q 4


    Excise Taxes STax
    Supply
    Schedule
    P
    P Qs $5 S
    CS
    $5 $7 140 4

    $4 $6 120 Tax Tax is the vertical


    3 distance between
    $3 $5 100 Tax supply curves
    2
    $2 $4 80 PS
    $1 $3 60 1
    D

    o 40 60 80 100 120 140 Q 5


    Identify the
    following:
    Excise Taxes S Tax
    1. How much is the
    tax?
    2. Price before tax P
    3. Price consumers $5 S
    pay after tax
    4. Price producers
    4
    get after tax
    5. Total tax revenue
    for the 3
    government before
    tax
    6. Total tax revenue 2
    for the
    government after 1
    tax D

    o 40 60 80 100 120 140 Q 6


    7
    Excise Tax
    P

    $14

    12
    11

    8 D

    10 12 Q
    Excise Tax Calculate
    P
    Stax 1. Tax Per Unit
    2. Total Tax
    S Revenue
    3. Amount of
    Tax paid by
    Pc$14 consumers
    4. Amount of
    12 Tax paid by
    Pp 11 producers
    5. Total
    Expenditures
    6. Total
    8 D Revenue for
    0 firms
    10 12 Q
    Excise Tax Calculate
    1. CS Before Tax
    2. Total Revenue Before
    Tax
    3. Tax Per Unit
    4. Total Tax Revenue that
    goes to Government
    5. Amount of Tax paid by
    consumers
    6. Amount of Tax paid by
    producers
    7. Total Revenue after tax
    8. Total Revenue for firms
    after tax
    9. CS After Tax
    10. DWL
    Tax Practice

    1. CS Before Tax
    2. PS Before Tax
    3. CS After Tax
    4. PS After Tax
    5. Tax Revenue
    for Government
    6. Dead Weight
    Loss due to tax
    7. Amount of tax
    revenue
    producers pay
    11
    12

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