Continued

1
Chapter 5

• Continued

2
A Quick Review

• What is an example of a Market Failure?
• What is an Externality?
• What is The Principle of Rival Consumption

3
Private vs. Public Goods

• What is the difference between a Private Good and
  a Public Good?
• On to new terms

4
Political Functions of Govt

• How good are the Arizona Cardinals for our local
  economy?

5
What Will This Do For Peoria?
6
What Will This Do To Tempe?
7
Private or Public Goods?

• Are the goods the Cardinals produce Private or
  Public Goods?
• Goods that have special merit politically are
  called Merit Goods
• What are some other examples of Merit Goods?

8
On The Flip Side

• The opposite of Merit Goods, are Demerit Goods?
• What are some examples of Demerit Goods?

9
While Were Talking Govt

• Not only could the government add taxes on any
  socially undesirable product, they could also
  redistribute income

10
Income Redistribution

• There are 2 ways to redistribute income
• 1. Transfer Payments
• 2. Progressive Income Tax

11
Transfer Payments

• Examples of Transfer Payments include
• Welfare
• Social Security
• Unemployment Benefits

12
Other Transfers

• Transfers in Kind Payments that are in the form
  of actual goods or services.
• What are some examples?

13
Taxes, Taxes, Taxes

• How does the government decide the amount of
  taxes to take?
• Plucking the goose, getting the largest amount
  of feathers with the least amount of hissing
  Jean-Baptiste Colbert (pg 105)

14
More Govt Money

• Marginal Tax Rate Change in taxes due, divided
  by the change in taxable income
• -Marginal Tax applies only to income in the
  highest tax bracket

15
More Taxes, Taxes, Taxes

• Average Tax Rate Total Taxes Due, Divided by
  Total Taxable Income
• Does this sound like a fair idea?

16
Tax Brackets

• A specified interval of income to which a
  specific tax rate applies
• There are variations of how to tax the different
  brackets

17
Taxation

• Proportional Taxation
• A tax system in which regardless of a persons
  income, the tax bill is exactly the same
  proportion
• -This is also known as a Flat Tax

18
Taxation

• Progressive Taxation
• A tax system in which as income increases, a
  higher of the additional income is taxed

19
Gains Losses

• The difference between the buying and selling
  price of an asset is know as a Capital Gain
• BUT ONLY IF IT IS A GAIN
• Otherwise it is called a ___________?

20
Tax Structure

• Incentive Structure The system of rewards and
  punishments that people face with respect to
  their own actions
• This is used to influence business
• Ex. Fuel-Cell Tech.

21
Tomorrow

• Be Ready To Work