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Effects of Taxes on a Market definitions

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  • Tax Revenue
    Total amount collected by multiplying the per unit tax by the quantity exchanged after the tax is imposed.
  • Per Unit Tax
    Fixed amount charged on each unit sold, calculated as the difference between buyer and seller prices.
  • Equilibrium Quantity
    Market amount exchanged where supply and demand curves intersect without any tax.
  • Supply Curve
    Upward sloping line showing the relationship between price and quantity sellers are willing to offer.
  • Demand Curve
    Downward sloping line showing the relationship between price and quantity buyers are willing to purchase.
  • Consumer Surplus
    Area above the price and below the demand curve, representing buyers' net benefit.
  • Producer Surplus
    Area below the price and above the supply curve, representing sellers' net benefit.
  • Deadweight Loss
    Lost economic surplus from trades that no longer occur due to the tax, shown as missing areas on the graph.
  • Economic Surplus
    Sum of consumer surplus, producer surplus, and tax revenue, representing total market benefit.
  • Rectangle
    Graphical area representing tax revenue, formed by the per unit tax and the quantity exchanged.
  • Equilibrium Price
    Market price where supply equals demand, before any tax is imposed.
  • Price Discrepancy
    Difference between what buyers pay and sellers receive after a tax is imposed.
  • Quantity After Taxes
    Amount exchanged in the market after the tax shifts supply or demand, typically less than equilibrium quantity.
  • Tax on Sellers
    Situation where the supply curve shifts left, causing sellers to receive less than buyers pay.
  • Total Surplus
    Combined value of consumer surplus, producer surplus, and tax revenue, maximized at equilibrium.