Bloody american goverment

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,18:44)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (denoir @ June 04 2002,18:24)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,18:15)</td></tr><tr><td id="QUOTE">and actually, laissez faire is the first step to general welfare. by having everyone choose what they want through supply and demand, each individual is capable of holding what they want. by this way, maximum welfare for accruded group of individual is achieved.(i'm not saying individual though)<span id='postcolor'>

That's an interesting point of view. I entirely disagree!

Laissez faire is the most extreme form of market economy. The government is more or less absent and the progress is measured as the sum of self-serving acts. With laissez faire you only help yourself and not others. It is up to each individual to survive for themselves.<span id='postcolor'>

i had feeling that you'd get that paragraph and shove a RPG into it

i'll focus on your last two sentences for now(got a headache).

first, if you, a baker, makes a bread costing you 10 francs and i am willing to buy it at market price(and afford it too), then a transaction is made. let's assume that market  clearing price is 15 francs. then you get 5 francs of profit for a loaf of bread and i get satisfaction of my stomach for paying that much(15 francs). sum of my satisfaction and your satisfaction is now greater than us relying on some arbitrary price made by gov't, like 10 francs.

in that case, I enjoy that 10franc bread while I would have paid 15, since i have more, my marginal satisfaction of consumption from bread is reduced, while your marginal satisfaction goes down since you don't make any profit, and that dissatisfaction goes much bigger than my increase in satisfaction. thus, over all(u and I combined) general welfare goes down.

that's why economics is so misunderstood. it should be about efficiency and increasing welfare for the most, but sometimes in application to real life, things get leftout due to restriction of RL.<span id='postcolor'>

Yes, except that you forget about Frank, who has no money to buy bread. So instead the goverment takes out a tax from which it gives a part to Frank for which he can buy bread and be satisfied. The price of the loaf becomes cost to produce + profit margin + tax. Say that for every 100 persons there are 10 that like Frank cannot afford the bread. So the government puts on a tax of (150/90) = 1.7 cents/bread. So instead of me paying 15 cents, I pay 15.85 cents. Your profit margin doesn't get reduced, but you only get a profit from the 90% of buyers.

So the result is: My price is increased by 5%. Your profit is decreased by 10%. So the average decrease is ((100*5% + 10%)/101) = 5.05% while we feed 10% more people.

So happiness down is 5.05% while happiess up is 10% which gives us 4.95% more happiness marginal then with the laissez faire.  QED.

laissez faire is also less fair

[Tex -USMC- 0]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (Warin @ June 04 2002,18:58)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">that's why economics is so misunderstood. it should be about efficiency and increasing welfare for the most, but sometimes in application to real life, things get leftout due to restriction of RL.<span id='postcolor'>

Ralph my man, you're describing socialism!!

Laissez Faire Capitalism is about everything BUT increasing the welfare of everyone.  It's about making money.  As much money as you can. No matter who you stomp/screw/exploit.  With a true laissez faire system, you will end up with no middle class at all.  

In the US, only taxation and unionization has kept that from happening.  Trade Unionism is about the only thing that created the great 'middle class' in the United States in the early to mid 20th century.<span id='postcolor'>

Let me just jump in here. The Labor Unions helped create the blue-collar middle class, but that was the extent of their effect

[ralphwiggum 6]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (denoir @ June 04 2002,18:34)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,18:15)</td></tr><tr><td id="QUOTE">2.on bicameral issue, I support it. it may not be the best, but sure beats unicameral. In small countries, unicameral is sufiecient, but bicameral fits better with larger political structure. if a dumb law passes one, there's always check and balance that can happen b4 it reaches finall checks and balance structure of judicial, executive and legislative branch.

a good example would be senate nixing a law proposal that is so absurd, yet due to sheer numbers of a party members in democraticaly chosen house of representatives, was able to survive.<span id='postcolor'>

Who's to judge if it is absurd? The bicameral system made sense before when there was considerable difference between the different regions in the country. Today, with global communication and a stardardized product market, it doesn't make any sense.

Of course to have a unicameral system that works, you should have more then two large political parties. For me that makes more sense. The direct vote for president doesn't make too much sense. Personal votes work in small groups, when you know the person in question. On a country scale you should vote on issues not personality.

Therefor IMO a good democratic system today is a unicameral parliamentary representative democracy. Have several parties and let them choose their leaders. Again, political issues are relevant, not the persons behind them.<span id='postcolor'>

in today's world, closeness can be deceptive. b4 9-11 we all thought the world shared their views and communicated each other and adopt each others idea. not true. more and more countries are adapting anti-US actions such as France's French only law, Middle EAastern countries' criticism of US and so forth. although technical innovations brought global population closer to each other, geographical difference mad cultural difference and that still persists. so there are different ideas and so forth.

on unicameral with multiple parties, JPN seems to be an example why we should reconsider it. JPN basically has numeous parties and unicameral, yet when it comes to election time, they all seems to congregate and form groups. what happens is that after election, within that group, there are political battles, and they can't have anything done while wasting time fighting about who should get what seat and so forth. this leads to political unrest.

I'd like to beleive that issues are where votes go, but unfortunate reality is that it's person behind the issues that gets vote. and that is one said part of humanity.

[ralphwiggum 6]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (Warin @ June 04 2002,18:58)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">that's why economics is so misunderstood. it should be about efficiency and increasing welfare for the most, but sometimes in application to real life, things get leftout due to restriction of RL.<span id='postcolor'>

Ralph my man, you're describing socialism!!

Laissez Faire Capitalism is about everything BUT increasing the welfare of everyone.  It's about making money.  As much money as you can. No matter who you stomp/screw/exploit.  With a true laissez faire system, you will end up with no middle class at all.  

In the US, only taxation and unionization has kept that from happening.  Trade Unionism is about the only thing that created the great 'middle class' in the United States in the early to mid 20th century.<span id='postcolor'>

LOL!

actually, I consider socialism to be a dgree of capitalism just how much you take away tax and redistribute it gets the label of either capitalist or socialist.

economics views that money matters. if you can't buy a decent dwelling and afford to shove some paste in your stomach, then welfare is not good.

lassez faire actually has underlying assumptions that are somewhat incompatable with real life. that assumption is that ppl engage in resource hunting in respected, law-biding way. this is not true in rl, sometimes, and in that case lassez fire is not in process, and has nothing to do with.

with lassezz faire, I doubt if middle class's doom is existent. there will always be some degrees of ppl who are better than others, so class structure will be more of pyramid shape of rich-middle-poor(from top to bottom), then diamond shape.

[ralphwiggum 6]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (denoir @ June 04 2002,19:00)</td></tr><tr><td id="QUOTE">Yes, except that you forget about Frank, who has no money to buy bread. So instead the goverment takes out a tax from which it gives a part to Frank for which he can buy bread and be satisfied. The price of the loaf becomes cost to produce + profit margin + tax. Say that for every 100 persons there are 10 that like Frank cannot afford the bread. So the government puts on a tax of (150/90) = 1.7 cents/bread. So instead of me paying 15 cents, I pay 15.85 cents. Your profit margin doesn't get reduced, but you only get a profit from the 90% of buyers.

So the result is: My price is increased by 5%. Your profit is decreased by 10%. So the average decrease is ((100*5% + 10%)/101) = 5.05% while we feed 10% more people.

So happiness down is 5.05% while happiess up is 10% which gives us 4.95% more happiness marginal then with the laissez faire.  QED. <span id='postcolor'>

this is exactly why economics is not in such good light.

in economics, a participant in economic activity has to be WILLING AND ABLE to purchase product. in your example, Frank(geeze, couldn't you come up with better name? did you choose this name cause I used 'franc'?) is willing but not able.

so now, your argument moves to political debate rather than economics(Which i've been staying). this is what I said about RL having some compromising effects on economic theory applied in RL.

Frank does not meet the requirement to be in economical transaction, but is a person related to that economy, so now the case would be economical agents(who are participating in transaction) to help those who are not.

actually, you calculation is making some assumptions that may not hold. for example, if market price is 15 francs, then cost of producing is 10francs, then profit is 5 francs. however, if tax is applied, profit should be reduced or Denoir the baker better not make the bread, becuase the tax just edged out your price above market clearing price and noone will buy it.

anyway. let me try to see what your eq is about.

[ralphwiggum 6]

here's addition to what i talked about possible assumptions fo yor computation.

first out of 90 ppl, some might not be bale to afford 15.85 franc price since that 90 ppl were chosen group who could afford bread at 15.00francs.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">So the result is: My price is increased by 5%. Your profit is decreased by 10%. So the average decrease is ((100*5% + 10%)/101) = 5.05% while we feed 10% more people.<span id='postcolor'>

I really don't get this part.since your price is incrased by 5%, to the total of 15.85 francs, and my profit is 4.50 francs.

since i sell 90 breads(assumed) my profit goes down by 90*0.50=45 francs and your extra cost is 0.85*90=76.5 francs from what could be at.(compared to lassez faire situation)

so cost to feed those 10 ppl would be sum of the two, meaing 121.5 francs, which is about 12.15 francs per person who can't feed themselves, which is short of market price of 15.85 francs. so they get much worse teasting bread.

but yes, on social conscience level, those 10 ppl do get bread, so that looks better than 90 ppl eating as much as they want.

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,19:23)</td></tr><tr><td id="QUOTE">actually, you calculation is making some assumptions that may not hold. for example, if market price is 15 francs, then cost of producing is 10francs, then profit is 5 francs. however, if tax is applied, profit should be reduced or Denoir the baker better not make the bread, becuase the tax just edged out your price above market clearing price and noone will buy it.

anyway. let me try to see what your eq is about.<span id='postcolor'>

I made some errors in the last calculation.

Let me step through it for you:

90 persons can pay for bread

10 persons cannot

The selling price for the bread is 15 and the production cost is 10 while your profit margin is 5

To finance the the bread for the ones that cannot

pay we need  15*10=150.

The price should be raised by 150/90 = 1.666 ~= 1.7

Now we take half of that on the consumer side and half of

that on the producer side. That is 0.85 increase in price for the consumer/bread and 0.85/bread decrease in profit for the producer.

The consumer's price becomes 15.85 which is a 5% increase in price.

The producers income is reduced by 0.85*90 = 76.5

That is a decrease of 76.5/(5*90)=17%

If we now look at the average of the percentages

= (sum of consumers + producer)/(consumer number + producer) = (5*90 + 17)/(90+1) = 5.13 %

While you feed 10/100 = 10%

Ok. I think I got it right now.

Edit. Fixed a mistake. I am getting tired and unfocused..

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,19:38)</td></tr><tr><td id="QUOTE">here's addition to what i talked about possible assumptions fo yor computation.

first out of 90 ppl, some might not be bale to afford 15.85 franc price since that 90 ppl were chosen group who could afford bread at 15.00francs.<span id='postcolor'>

Yes, that is a reasonable objection. For the simplicity of the model, I think we can assume that the ones that paid 15 francs can handle a 5% increase.

IRL there would be income balancing of course since the consumers are producers in another area.

I believe that laissez faire is good for allocating resources while it sucks for distribution of capital.

[ralphwiggum 6]

here's how i see it:

1. in case where 15 franc is the price where everyone can agree upon.

price of bread: 15francs

available buyer: 90

seller's cost of producing a loaf of bread: 10francs

then consumers will pay 15 francs, and profit for baker would be 450 francs. assuming that consumer's level of welfare is C1, the total welfare of society of 90 ppl are 450+C1

2. case where tax of 0.85 francs are levied. then cost of bread is now 15.85 francs.

price of bread: 15.85 francs

available buyer: 90

seller's cost of producing a loaf of bread: 10francs

tax: 0.85francs

so here, consumers are paying 0.85*90=76.5 francs more. while baker's profit does not change.

with 76.5francs more, we will feed 10 ppl, giving them equal amount of 7.65 frans worth of bread. there welfare is denoted as C2

so now, the total welfare is 450+C1-76.5+C2

now, comparing 1 and 2,

1. 450+C1

2. 450+C1-76.5+C2

the change in overall- welfare between scenarios is -76.5+C2.

so the question is, is C2 greater than -76.5?

the problem is that we don't know how happy will those 10 ppl getting bread would be. if sum of their welfare exceeds 76.5 francs, then mission accomplished. however, if not, then we are worse of having taxes.

[Warin 0]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">Let me just jump in here. The Labor Unions helped create the blue-collar middle class, but that was the extent of their effect

<span id='postcolor'>

Hum.

Without such a large blue collar middle class, I doubt you would have such a large white collar middle class.

Why, you say?

Without a large middle class you would have far less demand for the services and businesses that employ the true white collar middle class. Cant have the one without the other. Also, whatever social welfare that exists in the US today can be attributed to the union movement. I may be looking at it in a simplistic way...but it's true. the sad part is that trade unions no longer embody what they once did.

[ralphwiggum 6]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (denoir @ June 04 2002,19:55)</td></tr><tr><td id="QUOTE">I believe that laissez faire is good for allocating resources while it sucks for distribution of capital.<span id='postcolor'>

in economics, capital is resource....

but i get your spirit..and yes, distribution of welfare is also important for social stability. after all, we are not consuming, producing entities. we also feel and think. that's why we need taxes.

[Guest]

The difference between my and your model is that I tax the producer's profit too. Note that less profit doesn't mean loss of money!

So I tax the producer. So I take  76.5 from the 450 profit of the producer and can give full priced bread to the ones that couldn't pay. Since the producer is one person, I get good average percentages.

[Albert Schweitzer 10]

I dont want to correct anybody (but since you do that with me all the time too!   ) VAT is not a producers tax. VAT is a tax that is simply added on the product everytime it increases in value (value creation chain) and in the end hits the consumer!

I buy flower to produce bread for that I pay the purchase price + VAT (around 12% in Europe) and when I sell the item I add those 12% to the sales price of the item. Like this the tax increases relatively to rise in value

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (Albert Schweizer @ June 04 2002,20:07)</td></tr><tr><td id="QUOTE">I dont want to correct anybody (but since you do that with me all the time too!   ) VAT is not a producers tax. VAT is a tax that is simply added on the product everytime it increases in value (value creation chain) and in the end hits the consumer!

I buy flower to buy corn for that I pay the purchase price + VAT (around 12% in Europe) and when I sell the item I add those 12% to the sales price of the item. Like this the tax increases relatively to rise in value<span id='postcolor'>

Yes you are right. I'm just being tired and say stupid things. VAT is of course on the consumer side.

Ok, then, not VAT, but an corporate tax, or regular income tax, or whatever.. anyway on the producers side.

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 04 2002,20:03)</td></tr><tr><td id="QUOTE"></span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (denoir @ June 04 2002,19:55)</td></tr><tr><td id="QUOTE">I believe that laissez faire is good for allocating resources while it sucks for distribution of capital.<span id='postcolor'>

in economics, capital is resource....

but i get your spirit..and yes, distribution of welfare is also important for social stability. after all, we are not consuming, producing entities. we also feel and think.  that's why we need taxes.<span id='postcolor'>

In Sweden we have the opposite problem of the one in USA. Here the social democrats who have been in power more or less the last 70 years (with of course som interruptions) have gone entirely for the social stability regardless of the market situation. The result is that we have a 30-50% income tax and 25% VAT. The large taxes work as long as the economy and markets go well. As we all know markets are volatile. Their solution was every time that the market took a dive, they borrowed money.

During the 90' they realised that they couldn't continue that way and the result is that we still have the high taxes while the welfare, medical services and education has taken a big beating.

[ralphwiggum 6]

in your case, let's say that we try to give those 10 ppl same satisfaction as 90 ppl that bought bread

then 450+C1-76.5+C2 can be revised as follows.

since each person's satisfaction from those 10 cannot afford previously is same as 90 ppl who chould, then sum of satisfaction of those 10 ppl would be (1/9)of 90 ppl. thus giving us equation of (1/9)*C1=C2.

thus my equation is now

450+C1-76.5+(1/9)*C1 = 450+(10/9)C1-76.5

since we are taxing producer's tax, we can also say that

(450-tax)+(10/9)C1-76.5

for this to be better than 450+C1, -tax+(1/9)C1-76.5 needs to be greater than 0. so C2 has to be greater than 76.5+tax

let's stop numbers here...i'm getting worse headache...yuk!

and yes, as you pointed out, having too much tax is problem just as having less.

Edit:also in terms of economics, taxes hurt both consumers and producers. degree of it happening to each side depends upon elasticity.

[Guest]

Economy is so much BS. You either have the linear models, that we have been playing with that are easy to calculate but have no connection to reallity since they are way to much simplified.  Then we have the non-linear ones that are more accurate, but are impossible to calculate. I'm glad that I'm an engineer.

Now to generalize our little numbers it goes something like this  (linear model):

Demand function for bread:

D = a - b*Pc   (1)

Supply function for bread:

S = c + d*Pp   (2)

where Pc is the consumer price and Pp is the producer price.

When we add a tax, T we have ¨

Pc = Pp + T     (3)

so (3) in (1) ->

D = a - b*(Pp+T)  (4)

Equate the supply and demand:

a - b*(Pp + T) = c + d*Pp   (5)

And finally we use (5) in  (3):

Pc = (a - c + d *T)/(d+b) [6]

Now, for our tax to be good, it is required that we find a good constant d that both the consumer and producer can accept.

I'm going to try to make a bit more realistic model... kicking up MATLAB now..

Edit: Never mind. I was considering doing a non-linear differential model, but I now realised how incredibly boring that would be. I am sure many economists have done such models already, so it shouldn't be hard to find. Going to bed now

[Indychuck 0]

All I know is that this is when I call my accountant

[ralphwiggum 6]

well Denoir, I study Economics. surprised?  

i'm not really surprised that many ppl who have not studied economics extensibly consider it a BS. many ppl do not know philosophical assumptions that economists use to make it easier for ppl to understand. for example, we use a lot of simplified linear models, but reality dictates a curve. Demand curve is usually somewhere around 1/x-type, and supply curve is around x^a, where a is a constant greater than 1.(to cerain degree)

there are great relations to realife, but those are most basic philosophies, and when some idiots always use economics to support their argument, they usually don't consider much about other factors.

on the other hand, CS ppl claimed they were not affected by OLD model during high-days of internet economy bubble. Such an arrogant ppl engineers are..tsk tsk tsk...

I think there was some (minor)problem with your calculation(seems you are tired right now and overdone yourself)-i'm being picky

D = a - b*Pc   (1)

Supply function for bread:

S = c + d*Pp   (2)

where Pc is the consumer price and Pp is the producer price.

When we add a tax, T we have ¨

Pc = Pp + T     (3)

so (3) in (2) ->

S = c + d*(Pc-T)  (4)

Equate the supply and demand:

a - b*Pc = c + d*(Pc-T)   (5)

solve for Pc

Pc(-b-d) = c - dT -a

   =(c - dT -a)/(-d-b)

   =(dT+a-c)/(d+b)

easier to me

[Guest]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 05 2002,04:20)</td></tr><tr><td id="QUOTE">well Denoir, I study Economics. surprised?  <span id='postcolor'>

Not really You seem to know what you are talking about. I am just improvising with a course in industiral economics that I took two years ago as a base.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">

i'm not really surprised that many ppl who have not studied economics extensibly consider it a BS. many ppl do not know philosophical assumptions that economists use to make it easier for ppl to understand. for example, we use a lot of simplified linear models, but reality dictates a curve. Demand curve is usually somewhere around 1/x-type, and supply curve is around x^a, where a is a constant greater than 1.(to cerain degree)

<span id='postcolor'>

Still the commonly applied models are simple ones. Economy is a very complex thing in real life and we don't really have the mathematical knowledge to handle it deterministically.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">there are great relations to realife, but those are most basic philosophies, and when some idiots always use economics to support their argument, they usually don't consider much about other factors.

<span id='postcolor'>

My impression is that economics is much better at explaining why something went to hell then predicting what is going to happen.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">on the other hand, CS ppl claimed they were not affected by OLD model during high-days of internet economy bubble. <span id='postcolor'>

Hehe.. don't blame the computer geeks on that one. The internet bubble was a result of stock analysist having no grip on the technology and reality behind.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">Such an arrogant ppl engineers are..tsk tsk tsk... <span id='postcolor'>

Just because we know everything doesn't make us arrogant

As an electrical engineer i can tell you that CS people are not engineers

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">Equate the supply and demand:

a - b*Pc = c + d*(Pc-T)   (5)

solve for Pc

Pc(-b-d) = c - dT -a

   =(c - dT -a)/(-d-b)

   =(dT+a-c)/(d+b)

I think there was some problem with your calculation

<span id='postcolor'>

We came to the same result... so I don't think they are wrong here The trick I used in the previous discussion/calculation was to say that the producer is equivalent to one person. So when you make an average of 'loss' percentages his contribution to the global loss becomes small

[Tex -USMC- 0]

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote (RalphWiggum @ June 05 2002,04:20)</td></tr><tr><td id="QUOTE">I think there was some (minor)problem with your calculation(seems you are tired right now and overdone yourself)-i'm being picky

D = a - b*Pc   (1)

Supply function for bread:

S = c + d*Pp   (2)

where Pc is the consumer price and Pp is the producer price.

When we add a tax, T we have ¨

Pc = Pp + T     (3)

so (3) in (2) ->

S = c + d*(Pc-T)  (4)

Equate the supply and demand:

a - b*Pc = c + d*(Pc-T)   (5)

solve for Pc

Pc(-b-d) = c - dT -a

   =(c - dT -a)/(-d-b)

   =(dT+a-c)/(d+b)

easier to me <span id='postcolor'>

[Guest]

It's quite simple Tex. Look at the picture:

The two solid lines are for supply and demand. The Demand

line is being described by the equation for a straight line (y(x)=k*x + c):

D(Pc) = -b*Pc + a

while the supply line is described by the

S(Pp) = c + d*Pp

We add a tax offset T on the producents price:

D = a - b*(Pp+T)

Basic economical theory says that a deal is made when supply equals demand.

So we simply look where the two lines intersect. Algebraically it mean that we say that at that point S = D.

Then isolate the variable you want. For instance Pc.

And that's it. Nothing more too it.

[ralphwiggum 6]

heh heh heh!! made you stay up!!! gWAHAHAHAHAHAHA!!! Swedish war hero harassed by fat US civie!!

anyway, i prefer easier/simpler method to calculate. I really thought your last step was unnecessary since we could have used pc-T=Pp and substitute it.

</span><table border="0" align="center" width="95%" cellpadding="3" cellspacing="1"><tr><td>Quote </td></tr><tr><td id="QUOTE">So when you make an average of 'loss' percentages his contribution to the global loss becomes small <span id='postcolor'>

theoretically, under our assumptions, yes. but if producers are numerous(more like in RL) some will loose incentive to produce, thus aggregate quantity sold will be less. so it's quite inconclusive for both of us.

the reason why i make fun of CS ppl is that at one time, Bill Gates answered like this upon getting questioned by reporters like this:

Reporter: "Mr. Gates, do you think current explosion of IT boom is a bubble?"

Gates: "yes, but more money will come into it and support it."

-obviously, he doesn't know that there are diminishing returns.

currently US is somewhat leading in economics and related field due to merging mathematics with economics. can you beleive that there are about 4000 mathematics ph.D holders on Wall street?

usually the method of prediction is based on long-term for example, economists don't like mergers since they will show that eventually, company will have increase in coordination cost, thus hurting their profit.(llok at AOL-Time Warner).

also, longterm usually means around 10 yrs or more. when Clinton slashed gov't expenditure by 14billion dollars, ppl suffered, especially non-esential gov't branches like park services. but that slash eventually lead to growth of more flexible, agile small-or-medium sized industry which were capable of adapting new technologies and get used to changing environment, since less taxes were taken away from ppl.

[Tex -USMC- 0]

I have an affinity for literature, but mathematics (especially anything beyond fairly basic algebra) escapes me completely. Now, if you could just say right out that when the value and the demand are equal, a deal is made, I can get that easily. But if you draw me a graph of it I will look at you like you are from another planet.

[ralphwiggum 6]

here's more intuitive explanation tex,

in economics, there is supply(denoted as S) and there is demand(denoted as D). the price for a good and amount that will be sold is determined by market system. think of auction with many bidders and many suppliers. among that mess( ) a price will be present where most ppl have most goods.

in denoir's pic, that point is where P and Q meets.

now, in case tax is introduced, there will be some change in that graph. Here, consumers pay taxes, so that means they can only buy less with same amount of money they had b4 tax was introduced.(In most cases tax affects both demand and supply)

so, new market-clearing price after tax is introduced(meaning the price of good) is point where Q1 and Pp meets.

now, what's the problem? well, for one thing, amount that is under transaction is now reduced from Q to Q1, and price went down, but since amount that will be sold is down, only those who can afford that will be buying it.

consumers(demand) will get Q1 amount, and they have to pay Pc, while suppliers get Pp, seeling Q1 units.

for consumers, they pay more since Pc>P, and producers(supply) get less Pp<P. this means both sides loose welfare(in economics welfare means how well-off a person/entity is..not welfare social security benefit)

in case without taxes, consumer's welfare is triangular area under demand curve with base being horizontal like that stretches from left to right until P meats Q.

supplier's(producers) wellfare is triangular(upside down) from that horizontal line (from P to Q) to supply line.

but when tax is introduced, consumer's welfare is reduced to triangle with base horizontal like that stretched from Pc to Q1, and supplier's welfare is also reduced to triagle between horizontal line of Pp and Q1 to supply curve(line).

so it's inefficient in terms of economics. but in RL, ppl are not lean mean consumers and suppliers. we have hearts and feelings, so economics should stop at looking at efficiency.

and that equation both Denoir and I talked about is using math to see what would be the least amount of tax to be levied to help ALL society(in this case 100 ppl, not only 90 who can afford).