Asked by Lopez Anibal on May 26, 2024
Verified
The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.
Laffer Curve
A theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation, suggesting that higher tax rates beyond a certain point actually decrease total revenue.
Elasticities
Measures of how much the quantity demanded or supplied of a good responds to changes in price, income, or other factors.
Demand
The total quantity of goods or services that consumers are willing and able to purchase at a given price level in a market.
- Analyze the consequences of supply and demand elasticities on market distortions triggered by taxation.
- Ascertain the contribution of market elasticity to the calculation of deadweight loss and tax revenue.
Verified Answer
MB
Michelle BakerMay 31, 2024
Final Answer :
False
Explanation :
The Laffer curve illustrates the relationship between tax rates and the total tax revenue collected by governments, showing how changes in tax rates can influence economic activity and tax revenue, not the comparison of taxes in markets with different elasticities of demand or supply.
Learning Objectives
- Analyze the consequences of supply and demand elasticities on market distortions triggered by taxation.
- Ascertain the contribution of market elasticity to the calculation of deadweight loss and tax revenue.