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Effects of Taxes on a Market definitions

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  • Tax Revenue
    Funds collected by the government, calculated as the per unit tax multiplied by the quantity exchanged after a tax is imposed.
  • Per Unit Tax
    A fixed amount charged on each unit sold, creating a difference between buyer and seller prices.
  • Quantity Exchanged
    The number of units traded in the market, which decreases when a tax is imposed.
  • Equilibrium
    The market state where supply and demand intersect, maximizing total surplus and ensuring efficient trade.
  • Consumer Surplus
    The area above the price and below the demand curve, representing buyers' net benefit; reduced by a tax.
  • Producer Surplus
    The area below the price and above the supply curve, showing sellers' net benefit; diminished when a tax is imposed.
  • Economic Surplus
    The sum of consumer surplus, producer surplus, and tax revenue, indicating total market benefit.
  • Deadweight Loss
    Lost surplus from trades that do not occur due to a tax, represented by areas not captured by consumer, producer, or tax revenue.
  • Efficient Quantity
    The level of output where total surplus is maximized, achieved at equilibrium without a tax.
  • Demand Curve
    A graphical representation of buyers' willingness to pay at various prices, used to determine consumer surplus.
  • Supply Curve
    A graphical representation of sellers' willingness to sell at different prices, used to calculate producer surplus.
  • Total Surplus
    Combined benefit to consumers, producers, and government, maximized at equilibrium and reduced by a tax.
  • Price Buyers Pay
    The amount buyers spend per unit after a tax, higher than the equilibrium price.
  • Price Sellers Receive
    The amount sellers get per unit after a tax, lower than the equilibrium price.
  • Rectangle of Tax Revenue
    The graphical area representing tax revenue, formed by the per unit tax and the quantity exchanged.