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The simplified examples assume incorrectly that taxes are non-distortionary: the same number of widgets were made and sold both before and after the introduction of the tax. However, the supply and demand economic model suggests that any tax raises the cost of the product for someone. In raising the cost, the supply curve shifts leftward ...
Furthermore, different types of indirect taxes differ in terms of administrative costs. VAT, in which the large proportion of the revenue is generated by large corporations responsible for large part of the economy's values added has lower administrative costs than sales tax, in which the tax is imposed only at the final level in countless ...
Second, the tax raises the production cost as with the specific tax but the amount of tax varies with price level. The upward shift of the supply curve is accompanied by a pivot upwards and to the left of the original supply curve. The vertical distance between the two supply curves is equal to the amount of tax in per cent.
For example, the seller might drop the price of the product to $0.70 so that, after adding in the tax, the buyer pays a total of $1.20, or $0.20 more than he did before the $0.50 tax was imposed. In this example, the buyer has paid $0.20 of the $0.50 tax (in the form of a post-tax price) and the seller has paid the remaining $0.30 (in the form ...
In common usage, as in accounting usage, cost typically does not refer to implicit costs and instead only refers to direct monetary costs. The economics term profit relies on the economic meaning of the term for cost. While in common usage, profit refers to earnings minus accounting cost, economists mean earnings minus economic cost or ...
The profit function is the convex conjugate of the cost function. [95] [96] Convex analysis is the standard tool for analyzing textbook economics. [95] Non‑convex phenomena in economics have been studied with nonsmooth analysis, which generalizes convex analysis. [97] coordination good A good created by the coordination of people within civil ...
In economics, the cost curve, expressing production costs in terms of the amount produced. In mathematical optimization, the loss function , a function to be minimized. Topics referred to by the same term
In economics, a cost function represents the minimum cost of producing a quantity of some good. The long-run cost curve is a cost function that models this minimum cost over time, meaning inputs are not fixed. Using the long-run cost curve, firms can scale their means of production to reduce the costs of producing the good. [1]