Bellringer: in your notesGraph these demand & supply schedules for widgets

Price QD QS

$1 5 2$2 4 3$3 3 4$4 2 5$5 1 6Label equilibrium price P* and quantity Q*

Title for today’s notes: per-unit

tax burden

Widget market• Say the production of these products are slightly toxic

• Arizona wants to collect a $1.50 per unit tax on these widgets

• Who is burdened?

• Show DWL• Elasticities?

Price

Q

Real world example of previous product?

• Sketch supply/demand for this product, with proper elasticities for

• Show clip

Cigarettes• Who bears bigger

burden of per-unit tax?

• Rule: steeper elasticity burdened more

• “look for inelastic curves”

Price

Q

Next Example:• 3 products ONLY ultra-high net worth would purchase

Luxury yachts• Who bears bigger

burden of per-unit tax?

• Rule: steeper elasticity burdened more

• “look for inelastic curves”

Price In Millions

Q

Last Example: Soda

• Show clipPrice

Q

Elasticity Project (30 points)• You can work alone or with one partner1. Prepare a pamphlet or poster chart for your boss

explaining the following:2. Price Elasticity, its calculation, 2 specific ∆causes3. Cross Price Elasticity, its calculation 2 specific ∆causes4. Income Elasticity, its calculation 2 specific ∆causes5. Supply Elasticity, its calculation 2 specific ∆causes6. Translate the “econ speak” into English for your boss7. Explain why these are important using examples for your

firm (make sure you include what type of demand/supply your goods have & draw/explain graphs

8. Explain how tax policy could affect your goods/services, income and per unit taxes (graph + explain) (ch 6 or 7)

Use this comic + Parkin Ch 5-7