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1.2 Consumer and producer surplus, Consumer-Surplus-Graph-e1581280302273,…
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The total revenue from the tax is the sum of the two rectangles.
The value of the tax is the shift in the supply curve.
Consumer burden is above producer burden as the consumers are paying the new higher price.
Deadweight loss are the two triangles that are not recovered in tax revenue.
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Producers- increased consumer surplus as price decreases.
Governments- Gov subsidise products that help government reach social goals.
However, they have an opportunity cost and they are frowned upon by the WTO as it is seen as anti-competitive.
Social awareness- knowing the negatives of smoking
Social norms- Not using plastic bags.
Social pressure- knowing the dangers of alcohol but consuming it due to others.
Consumers are rational to a point as they could have computational weaknesses or lack of information. They will use Hueristics or rule of thumb to make decisions.
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