Optimal Taxation III -- Public Economics V, 6/11

[@lynx2082]

Thank you sir, this was very helpful.

[@Veronica-ct7pr]

excuse me, is it compulsory to have two goods in order to calculate the optimal taxation? thank you a lot

[@ben_elsner]

Well with one good the problem is (somewhat) trivial. For a given tax revenue, there is at most one tax rate that yields this tax revenue. With two or more goods we can set an individual tax rate for each good and find the combination of tax rates that minimizes the deadweight loss. So there are many combinations of tax rates but in a standard model there is only one combination that maximises efficiency.

[@Veronica-ct7pr]

@@ben_elsner Thank you :)