MYTUTOR SUBJECT ANSWERS

289 views

What is the Laffer curve?

The Laffer curve shows the theoretical relationship between tax rates and tax revenues.

Imagine a government charges a 0% income tax; they definitely won’t receive any money from that tax. Meanwhile, at 100%, no one has incentive to work in paid employment, so they don't earn any money and the government receive no tax revenue. In between, we have tax revenue rising at first, but then falling with the average tax rate.

As the tax rate increases, the government receive more money from the tax. However, as the tax rate continues to increase, people get less and less of the money they earn as the government is taking ever more of it.

At some tax rate t*, the government can maximise the amount of tax revenue it receives at R*. At this point, neither increasing nor decreasing the tax rate can lead to an increase in tax revenue. 

Matthew D. GCSE Economics tutor, A Level Economics tutor, GCSE Maths ...

7 months ago

Answered by Matthew, an A Level Economics tutor with MyTutor


Still stuck? Get one-to-one help from a personally interviewed subject specialist

62 SUBJECT SPECIALISTS

£24 /hr

David L.

Degree: Economics (Bachelors) - LSE University

Subjects offered: Economics, Music+ 4 more

Economics
Music
Maths
Extended Project Qualification
English
-Personal Statements-

“I am a currently a student studying BSc Economics at the London School of Economics. I have had an exemplar academic record, achieving two A*s and three As at A-Level in Maths, Further Maths, Economics, Music and EPQ; and the equivale...”

£20 /hr

Em M.

Degree: Economics with Management (Bachelors) - Durham University

Subjects offered: Economics, Maths+ 2 more

Economics
Maths
French
English Literature

“About me: I'm studying Economics with Management at Durham University and as I'm in my first year, I remember very clearly what it is like to take GCSEs and A Levels! I am happy to run sessions on GCSE Maths, Economics or French, and ...”

MyTutor guarantee

£26 /hr

Jonathan A.

Degree: Economics (Masters) - University College London University

Subjects offered: Economics, Philosophy+ 4 more

Economics
Philosophy
Maths
Government and Politics
.TSA. Oxford.
-Oxbridge Preparation-

“About Me: I am studying for an MSc in Economics at University College London.  I did my undergraduate degree in Oxford studying Philosophy, Politics and Economics, and as a result amfamiliar with the tutorial system from the student's...”

About the author

Matthew D.

Currently unavailable: for new students

Degree: Economics (Bachelors) - LSE University

Subjects offered: Economics, Spanish+ 2 more

Economics
Spanish
Maths
-Personal Statements-

“I'm a recent Economics graduate from LSE who is about to start a Masters at UCL in Globalisation and Latin American Development. My studies have helped bring together three subjects that I really enjoy:Economics, Maths and Spanish. I ...”

You may also like...

Posts by Matthew

What happens to the Production Possibility Frontier (PPF) when productivity only increases in one good?

What is the Laffer curve?

Other A Level Economics questions

Do only monopolies have monopoly power?

What is the Phillips Curve?

How can I effectively use graphs in my essay?

What is protectionism?

View A Level Economics tutors

Cookies:

We use cookies to improve our service. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok