Commodity Taxes and Subsidies

… a core topic in Economic Analysis and Atlas102

TaxWedgeTopic description

This topic deals with taxes other than income taxes and subsidies other than individual transfer payments.

The treatment of this topic on the Atlas follows almost precisely that in Chapter 4, Taxes and Subsidies, of the open access Principles of Microeconomics course offered by Tyler Cowen and Alex Tabarrok at the Marginal Revolution University online education platform (, accessed 28 April 2016).

Topic learning outcome

Appropriately utilize and interpret results of applying to the analysis of public policy and management problems the basic principles of taxes and subsidies, including following core concepts.

Core concepts associated with this topic
Commodity Taxes

Burden of a Tax – Economic vs. Legal Incidence

Tax Revenue and Deadweight Loss


Benefit of a Subsidy – Economic vs. Legal Incidence

Wage Subsidies vs. Minimum Wage


We believe that this topic and its core concepts can be mastered to the MPP/MPA level by watching and re-watching the 49 minutes of MRU course videos listed below and doing the 29 sample questions associated with these video segments and reproduced at the bottom of this page and repeated on the appropriate concept pages.

Atlas pages: Taxes and Subsidies and associated Concepts.

Tyler Cowen, Commodity Taxes, Marginal Revolution University, 11-minute video, at, accessed 28 April 2016.

Tyler Cowen, Who Pays the Tax?, Marginal Revolution University, 9-minute video, at, accessed 29 April 2016.

Alex Tabarrok, Tax Revenue and Deadweight Loss, Marginal Revolution University, 12-minute video, at, accessed 29 April 2016.

Alex Tabarrok, Subsidies, Marginal Revolution University, 13-minute video, at, accessed 29 April 2016.

Alex Tabarrok, Wage Subsidies, Marginal Revolution University, 4-minute video, at, accessed 29 April 2016.

Textbook readings in MPP and MPA courses 

To come

Assessment questions (from MRU Practice Questions for Chapter 4)

From, accessed 28 April 2016.

AQ102.04.03 Junk food has been criticized for being unhealthy and too cheap, enticing the poor to adopt unhealthy lifestyles. Suppose that the state of Oklakansas imposes a tax on junk food. For the tax to actually deter people from eating junk food, should junk food demand be elastic or inelastic?

AQ102.04.14. Decades ago, Washington, DC, a fairly small city, wanted to raise more revenue by increasing the gas tax. Washington, DC, shares borders with Maryland and Virginia, and it’s very easy to cross the borders between these states. How elastic is the demand for gasoline sold at stations within Washington, DC? In other words, if the price of gas in DC rises, but the price in Maryland and Virginia stays the same, will gasoline sales at DC stations fall a little, or will they fall a lot?

AQ102.04.27. What effect do wage subsidies have on employment?

Page created by: Ian Clark, last modified on 16 May 2016.

Image: Minute 8:40 of MRU Video, at, accessed 19 April 2016.