SUMMARY / RELATED TOPICS

Effect of taxes and subsidies on price

Taxes and subsidies change the price of goods and, as a result, the quantity consumed. There is a difference between an Ad valorem tax and a specific tax or subsidy in the way how it is applied on the price of the good; the final effect stays similar though. In the end levying a tax moves the market to a new equilibrium where the price of a good paid by buyers increases and the price received by sellers decreases; the incidence of a tax does not depend on whether the sellers are taxed. Most of the burden of a tax falls on the less elastic side of the market because of the lower ability to respond to the tax by changing the quantity sold or bought. Introduction of a subsidy, on the other hand, lowers the price of production which encourages firms to produce more; such a policy is beneficial both to buyers, who can buy the good for lower price. The effect of a specific tax can be divided into three steps. First, in the case of a specific tax, the immediate impact of the tax hits the sellers; the demand for a good is the same for a given price level.

On the other hand, the tax makes the good in fact more expensive to produce for the seller. This means that the business is less profitable for a given price level and the supply curve shifts upwards. Second, the higher cost of producing the good reduces the quantity supplied at any given price; the upward shifted supply curve is parallel to the original supply curve because no matter the quantity supplied, the seller’s expenses on the production are the same. Therefore the distance between the original and the new shifted supply curve is equal to the amount of tax imposed. Whatever the price of the good, the price for which the sellers are selling is lower by the amount of the tax; this makes the sellers supply the amount of the good as if the price were lower by the amount of the tax. In order for them to supply a given quantity of the good, the market price needs to be higher by the amount of tax so that it will compensate for it. Last, after the shift of the supply curve is taken into account, the difference between the initial and after-tax equlibrium can be observed.

The growth of market price is determined by the price elasticities of supply. In the case of demand being more elastic than supply, the incidence of the tax falls more on sellers and the consumers feel a smaller growth of price and vice versa. In both cases, the consumers pay more for the good and while the sellers receive more money, after the tax is accounted for, they are left with less money than if there were no tax imposed; the tax both raises the price the customers buy the good for and lowers the price the producers are selling the good for. The difference between the two prices remains the same no matter who bears most of the burden of the tax, but imposing a tax always impacts both the buyer and the seller. The original equilibrium price is $3.00 and the equilibrium quantity is 100. The government levies a tax of $0.50 on the sellers. This leads to a new supply curve, shifted upward by $0.50 compared to the original supply curve. The new equilibrium price will sit between $3.00 and $3.50 and the equilibrium quantity will decrease.

If we say that the consumers pay $3.30 and the new equilibrium quantity is 80 the producers keep $2.80 and the total tax revenue equals $0.50 x 80 = $4.00. The burden of the tax paid by buyers is $0.30 x 80 = $2.40 and the burden paid by sellers equals $0.20 x 80 = $1.60. The effect can be broken down into three steps. First, the tax again affects the sellers; the quantity demanded at a given price remains unchanged and therefore the demand curve stays the same. The seller has to again deal with more expensive production but the effect is different for each price level. Since the tax is a certain percentage of the price, with increasing price, the tax grows as well; the supply curve shifts upward but the new supply curve is not parallel to the original one. Second, the tax raises the production cost as the specific tax but the amount of tax varies with price level; the upward shift of the supply curve is accompanied by a pivot upwards and to the left of the original supply curve. The vertical distance between the two supply curves is equal to the amount of tax in per cent.

The effective price to the sellers is again lower by the amount of the tax and they will supply the good as if the price were lower by the amount of tax. Last, the total impact of the tax can be observed; the equilibrium price of the good rises and the equilibrium quantity decreases. The buyers and sellers again share the burden of the tax relative to their price elasticities; the buyers have to pay more for the good and the sellers receive less money than before the tax has been imposed. The pre-tax equilibrium price is $5.00 with respective equilibrium quantity of 100. The government imposes a 20 per cent tax on the sellers. A new supply curve emerges, it is shifted upward and pivoted to the left and upwards in comparison to the original supply curve and their distance is always 20 per cent of the original price. In the pre-tax equilibrium the distance equals $5.00 x 0.20 = $1.00. This burden of the tax is again shared by the seller. If the new equilibrium quantity decreases to 85 and the buyer bears a higher proportion of the tax burden, the total amount of tax collected equals $1.00 x 85 = $85.00.

The buyer faces the tax of $0.75 x 85 = $63.75 and the tax paid by the seller equals $0.25 x 85 = $21.25. The price the consumer buys the good for equals $5.75 but the seller only receives $4.75. Marginal subsidies on production will shift the supply curve to the right until the vertical distance between the two supply curves is equal to the per unit subsidy.

Ern Westmore

Ern Westmore, born Ernest Henry Westmore, was a Hollywood make-up artist and sometimes actor, the third child in George Westmore's famed Westmore family tree. Perc Westmore's twin, the two were born in 1904 in Canterbury, England moving to Canada and the United States. Considered the most talented of the Westmore brothers, Ern found work at Warner Bros. studio, RKO Studios, Eagle-Lion Studios. He was the director of make-up on over 50 films during his career, was featured as himself in a number of B-movie-style features for Kroger Babb, including One Too Many, Secrets of Beauty known as Why Men Leave Home, an instructional primer for women regarding how to keep their husbands faithful. Ern was involved in the creation of the House of Westmore with three of his brothers, it was billed as a place of beauty for women, Ern was forced to borrow $40,000 from John Barrymore and Errol Flynn to assist in the financing, never paying them back. In 1955, Babb set Westmore up with his own television series.

Called Hollywood Today, but called Hollywood Backstage and The Ern Westmore Show, The Ern Westmore Hollywood Glamour Show was a program featuring make-up tips and beauty suggestions. Ern struggled with alcoholism throughout his life, drinking as early as 1921. Involved with Barrymore, John Decker, W. C. Fields, Ern would be forced out of Warner Bros. because of his alcohol problem. It led to work with One Too Many. Ern struggled in his personal life due to his vices, having been married four times during his life, fathering two children. Ern died in New York City in 1967 of an apparent heart attack. Grandson Robert B. Crawley, Jr. son of Muriel Westmore Crawley and Bob Crawley, Sr. was art director at Universal Studios. Westmore family Ern Westmore on IMDb Hollywood Today on IMDb

Ghulam Ahmad (forester)

Shaikh Ghulam Ahmad was a Pakistani forestry official and managing director and Chairman of Pakistan Chrome Mines Ltd, the largest and oldest chrome mining company in Pakistan. In World War II he served in the Royal Indian Air Force as an Engineer Officer, fighter pilot and military engineer, he wrote Unique and Everliving, a biography of the Islamic prophet, Muhammad. The book was written over a period of five years; the book is published by Ferozeson's Ltd. a book publisher in Pakistan. This book available in Libraries in the United States including the Library of Congress He was born in the city of Poonch, in Poonch District of Kashmir, on 23 May 1923, he was educated there at a school where Shaikh Ghulam Rasul, was the headmaster. He migrated to Pakistan along with his family, during the independence of Pakistan in 1947, he married Jamila Begum at Rehara, Azad Kashmir, Pakistan on 11 May 1949. He had three sons: Khalid Adnan, an electrical engineer, Tariq Ahmad PE SPEC a petroleum engineer, Mobashir Ahmad, a geophysicist and metallurgical engineer, Mobashir Ahmad was a second lieutenant in the United States Army Corps of Engineers, two daughters: Dr. Rehana Kausar and Dr. Khalida Yasmin.

Dr. Yasmin was a captain in the United States Air Force, his eldest daughter was the first female doctor from Rawalakot. She was the first female anesthesiologist from Azad Kashmir, he has six granddaughters. His grandson received a purple heart for his service in the United States Army as an officer, he received a B. Sc. degree in physics and a master's degree in statistics from the University of Punjab in Lahore. He received a postgraduate diploma in natural resource development ITC, Netherlands, he joined the Royal Indian Air Force as a Fighter Pilot in Indian Air Force. He fought against the Japanese Imperial Army in Burma during World War II, flying in a Hawker Hurricane fighter plane, he was selected for the Forest Service after World War II and trained at the Forest Research Institute at Dehradun, India. After the independence of Pakistan in 1947 he joined the Pakistan Forest Service, becoming the Chief Conservator of Forests and Director of the Aerial Survey Project in Peshawar, where he surveyed the North-West Frontier Province for a Natural Resources Survey from 1965–1969.

He introduced hybrid poplars in Pakistan, including Azad Kashmir, Rawalakot, changing the living conditions of the rural population. He supervised an aerial survey of the Indus River Basin for the development of natural resources, he emigrated to the United States in August 1971 to complete a PhD in Civil Engineering at Colorado State University, joined the Colorado Department of Military Affairs, where he helped to draft the Emergency Response Plan for the State of Colorado. From 1983 until 1999 he was the Managing Director of Pakistan Chrome Mines Ltd