1. PRINCIPLES OF MACROECONOMICS
Text: Principles of Macroeconomics, N. Gregory Mankiw, Sixth Edition.
Instructor: Sue Guzek, Kansas State University Salina
Music: We Gonna Make You… By Troy “Trombone Shorty” Andrews and Orleans
Avenue – Orleans and Claiborne
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APPLICATION:
INTERNATIONAL
TRADE

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5. TAX DISTORTION AND ELASTICITY
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The more elastic
the supply, the
larger the
deadweight loss
of tax

6. DEADWEIGHT LOSS AND LABOR
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Is supply of labor elastic??? Or inelastic???
If labor supply is Elastic,
then increase in taxes will
cause more people to
decrease their working
hours
If labor supply is INelastic, then
increase in taxes will have little
impact on supply of labor

7. DEADWEIGHT LOSS AND TAX REVENUE
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Small tax = Small
Revenue
Larger tax = More
Revenue
Very Large Tax = Reduced
Revenue

8. LAFFER CURVE – WHAT DOES IT REALLY LOOK LIKE?
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IS IT THIS…
Or This???
OR THIS???

9. TERMS AND CONCEPTS
 Deadweight Loss
 Laffer Curve
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10. SOURCES
Principles of Macroeconomics, N. Gregory
Mankiw, Sixth Edition: PowerPoint Slides
prepared by: Andreea CHIRITESCU, Eastern
Illinois University
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