competitive market ppt(group xii)
TRANSCRIPT
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under the guidance of
Prof. SAMIK SHOME
Submitted by
Dushant Dayal
Nisha Sharma
Varun BennurVidit Agarwal
Yangerjungla
----Group XII
(SEC-C)
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Perfectly Competitive MarketCompetitive market is defined as the form of market organisation in
which
(i) There are many buyers & sellers of a product ,each too small to affect
the price of the product.
(ii) The product is homogenous.
(iii) There is perfect mobility of resources.
(iv) Economic agents have perfect knowledge of market conditions.
(v) Free entry and exit of sellers.
(vi) There is no transportation cost.
(vii) The main aim of the firm is profit.
(viii) No government intervention.
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WHAT IS
TAX?
TAXis to impose a financial charge or other levyupon a taxpayer (an individual or legal entity) by
a state or the functional equivalent of a state suchthat failure to pay is punishable by law.
A tax is not a voluntary payment or donation, butan enforced contribution.
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Types of Taxes
Direct taxes :-may be adjusted to the individual characteristics of the
taxpayer (e.g. income taxes, taxes on property)
Indirect taxes:-are levied on transactions irrespective of the
circumstances of buyer or seller (e.g. taxes on the expenditure ongoods and services)
An expenditure tax is a tax on the sale of a particular commodity:
Specific sales tax
As a fixed amount per unit sold
Ad valorem tax
As a fixed percentage of the value of the commodity
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Price per unit
Quantity per day
D
S
S + tax
A
B
E
F
Govt. revenue
= A + B
Reduction in
producer
surplus = B + F
Reduction in
consumer surplus= A + E
Dead-weight loss = E + F
The burden oftaxation anddemand elasticity and
dead weight loss
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Taxation In Competitive MarketWhen Demand Curve is Elastic (1
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Max part of the tax is borne by the customer when
Demand Curve becomes more inelastic & Supply Curve
becomes more Elastic (eg. Food products such asvegetables).
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Tax and perfectly inelastic demand (elasticity = 0)
(eg. Essential commodities such as salt)
Price per unit
Quantity per day
D
S
S + tax
A
A = tax revenue,
paid entirely by
consumers
Producer bears
none of the tax
burden
No dead weight
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Tax and perfectly elastic demand (e= g)
eg. Unlimited internet.
Price per unit
Quantity per day
D
S
S + tax
B
Tax leads to
reduction in quantitydemanded, no price
adjustment
B = tax revenue, paid
entirely by producers
Consumer bearsnone of the tax
burden
C = dead-weight
loss
C
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If supply is perfectly inelastic then the tax iscompletely borne by producers.
Eg. Antique paintings
Price
Quantity
D
S+T
P E
O
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When supply is perfectly elastic then the tax iscompletely borne by consumers. (Eg. Packed mineralwater).
Price
Quantity
E+T
E
Pt
P
S+T
S
O
D
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