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by dangerlibrary
3150 days ago
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Imagine a world where there is no corporate tax. Apple does a price analysis and decides the profix maximizing sales point of a phone is $1,000. They price the phone at $1,000. Then, a 10% corporate income tax rate is put in place. Does Apple raise the price of the phone to $1,100? Is that now the profit maximizing decision? According to your claim "Ultimately, only people pay taxes," the answer is yes - Apple would immediately raise the price of the iPhone to offset the loss incurred by the new tax. Except that then, fewer people would buy iPhones. We already know that $1,100 is not the profit maximizing price point for a phone. So, the amount Apple would increase its price is a function of the price sensitivity of iPhone buyers. This is a little tricky to explain, but khan academy has a video that explains it quite well. https://www.khanacademy.org/economics-finance-domain/microec... |
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$1,000 is a profit maximizing price point with 0 % taxes. With 10 % taxes it would be different.