Chapter 8

Chapter 8 goes over the affects of taxes on welfare, the market, and deadweight loss. Welfare depends on how to consumers, producers, and the government are better off. Without taxes the consumers and producers are better off, but with tax the consumers and producers are worse off, but the government is better off. If the losses of the buyers and sellers outweighs the revenue raised by the government there is a deadweight loss. When a tax is imposed the market becomes smaller because the quantity sold and demanded decreases. Therefore more people leave the market. Taxes cause deadweight loss because they prevent buyers and sellers from realizing the gains of trade. The quantity of deadweight loss depends on the elasticities of supply and demand. I'd give this chapter a 1 in difficulty. The graphs made the whole concept of deadweight loss very easy to understand and I do not have any questions yet.