Answer to Question #8305 in Other Economics for ann mary
applying different tariff and basis taxation, in order to apply policy that has
built. Policymakers debate the nature of the tax structure they plan to implement (i.e.,
how progressive or regressive) and how they might affect individuals and businesses (i.e., tax incidence). The reason for such foitution effect, because anything that does not
change relative prices is nondistortionary. One must also consider the income effect, which for tax policy purposes often needs to be assumed to cancel out in the
aggregate. The efficiency loss is depicted on the demand curve and supply curve
diagrams as the area inside Harberger's Triangle.
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