CHAPTER 19:

MARKET SUCCESS, MARKET FAILURE,

AND GOVERNMENT

FIGURES
 Figure 19.1 Income Taxes With Different Progressivities

30 [i]. Proportional 30 [ii]. Progressive [2]

25 25

Tax paid [£000]

20
Tax paid [£000]

20

15 15 [1]
10 10

5 5

10 20 30 Income [£000] 10 20 30
30 Income [£000]

[iii]. Regressive 25 [3]

20

15
Tax paid [£000]

[4]

10

10 20 30 Income [000]
 Figure 19.3 The Inefficiency of Free Goods

D
S
Price

E0
2
p0

0 q0 q1

Quantity
 Figure 19.4 The Efficiency Loss From an Indirect Tax
Price

0
Quantity
 Figure 19.4 The Efficiency Loss From an Indirect Tax

S
Price

p0
E0

0 q0

Quantity
 Figure 19.4 The Efficiency Loss From an Indirect Tax

S
Price

Tax

p0
E0

0 q0

Quantity
 Figure 19.4 The Efficiency Loss From an Indirect Tax

S1

S
Price

Tax
E1
p1

p0
p2 E0

0 q1 q0

Quantity
 Figure 19.5 An Income Tax and the Work-leisure Choice

24

20
G
E1
18
E0
Leisure [hours/days]

16
15
E2

10

0 120 240 320 480 840 960

Daily income [£]

 Figure 19.8 Disincetives of Welfare Schemes

24 E0
Leisure [hours]

19
a
16 E1

I1 I0

0 25 40 120

Income [£]
 Figure 19.9 Government Failure

MC2 MC1

MB
10

0 1.6 4

Pollution abatement [millions of tonnes]