Chapter 8
Producer and Consumer Surplus consumer surplus — the value the consumer gets from buying a product less its price. producer surplus — the price the producer sells a product for less the cost of producing it.
Burden of Taxation
A tax paid by the supplier shifts the supply curve up by the amount of the tax.
The loss of consumer and producer surplus from a tax is known as deadweight loss . Deadweight loss is shown graphically by the welfare loss triangle — a geometric representation of the welfare cost in terms of misallocated resources caused by a deviation from a supply/demand equilibrium.

The cost of taxation includes the direct cost of revenue paid, lost surplus, and administrative cost.

Interestingly, in terms of aesthetics, people have come to like the style of Paris roofs; it is one of the many things that makes Paris distinct. Including aesthetics complicates the analysis enormously.
Economic reasoning is based on the architectural view that form follows function.

Who Bears the Burden of a Tax?
Taxes are like hot potatoes: Everyone wants to pass them on to someone else. Nobody wants to pay taxes, and there are usually large political fights about whom government should tax. For example, should the Social Security tax (mandated by the Federal Insurance
Contributions Act, or FICA) be placed on workers or on the company that hires them? The supply/demand framework gives an unexpected answer to this question.

Burden Depends on Relative Elasticity

The person who physically pays the tax, however, is not necessarily the person who bears the burden of the tax.

In reality, the tax burden is rarely shared equally because elasticities are rarely equal.
The relative burden of the tax follows this general rule: The more inelastic one’s relative supply and demand, the larger the burden of the tax one will bear.

elasticity is a measure