Market Efficiency and Government Intervention. Market Efficiency and Government Intervention. In this chapter, we will take a closer look at the benefits of exchange, examining the experiences of both buyers and sellers.
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PRINCIPLE of Voluntary ExchangeA voluntary exchange between two people makes both people better off.
Willing to Pay
Total consumer surplus
Willing to Receive
Market producer surplus
Application: Taxi Medallions
Revenue Sources for Local, Stateand Federal Governments
If demand is elastic, the price will increase by a small amount and consumers will bear a small share of the tax.Tax Shifting: Forward and Backward
willingness to pay
willingness to accept
deadweight loss from taxation
excess burden of a tax