PART III: FINANCE AND TAX - TÀI CHÍNH
VÀ THUẾ KHÓA
66. Taxation
Equilibrium price and quantity are determined by supply and demand.
Yet the market is often distorted causing market quantity and price deviated
from their original equilibrium levels. One reason for the distortion is
taxation.
Gasoline consumption is normally subject to a unit tax, say VND200 a
liter. The tax creates a wedge between the price the buyers pay and the
price the sellers get. If motorbike users are paying VND3,500 per liter of
gasoline, gasoline stations are getting 3,500 - 200 = VND3,300 per liter.
As shown in the graph, the supply curve plus the tax is now above the
supply curve without the tax. The quantity of gasoline is reduced from Q*
