The excess burden of a tax is larger the greater are

The excess burden of a tax is larger the greater are 1) ________________________________, 2) ______________________________________, and 3) _______________________________. Fill in the blanks and explain. (Using the formula for excess burden will help fill in the blanks.) (15 points)

Expert Solution

Excess burden of tax rate is directly dependent on advalorem tax, tax yield and price elasticity of demand.

Excess burden= 1/2 × ^C × Advalorem tax× TaxYield

Hence excess burden of tax is larger, greater are

Advalorem tax
Price elasticity of demand
Tax yield.

Rahul Sunny answered 2 years ago

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