Changes

When the price is increased due to taxes, then both the buyers and the sellers lose out, and there is a deadweight loss that is even greater because it includes both a consumer surplus lost by the buyer and a producter surplus lost by the seller.  So while higher prices due to monopolies are bad, higher prices due to taxes are even worse.  Feel free to review the lecture and graph that discussed consumer surplus and producer surplus to understand this further.

When the price is increased due to taxes, then both the buyers and the sellers lose out, and there is a deadweight loss that is even greater because it includes both a consumer surplus lost by the buyer and a producter surplus lost by the seller.  So while higher prices due to monopolies are bad, higher prices due to taxes are even worse.  Feel free to review the lecture and graph that discussed consumer surplus and producer surplus to understand this further.

To show you how recent the theories of economics are, the term "rent seeking" behavior was introduced only 40 years ago.  It describes actions by firms to increase their prices and obtain economic rent above the free market, cometptitive price.  Such behavior is not good for the public, because it causes a deadweight loss (lost consumer surplus).

To show you how recent the theories of economics are, the term "rent seeking" behavior was introduced only 40 years ago.  It describes actions by firms to increase their prices and obtain economic rent above the free market, competitive price.  Such behavior is not good for the public, because it causes a deadweight loss (lost consumer surplus).

With that challenging introduction, let's have our review.

With that challenging introduction, let's have our review.