Business Economic

Cost of taxation

     Without tax ,

     CS=A+B+C

     PS=D+E+F

     tax revenue= 0

     total surplus = CS+PS

     With tax ,

     CS=A    

     PS=F

     tax revenue=B+D

     total surplus= A+B+D+F
    Therefore, C+E=deadweight loss


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Tariff- a tax on import
Argument for restricting trade
1) The jobs argument- trade destroy job that against import
2) The national security argument- protected from foreign competition
3)The infant-industry argument- temporary protection for new industry
4) The unfair competition argument- other country may have unfair advantage
5) the protection as bargaining chip argument- exchange trade item between 2 country.