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What Is the Difference Between a Marginal Tax Rate and an Average

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Essay

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?


Definitions:

Supply Schedule

A table or graph showing the quantity of a good that producers are willing and able to supply at different prices.

Tax Rate

The rate at which taxes are levied on an individual or a company's income.

Supply Elasticity

A measure of how much the quantity supplied of a good responds to a change in price, indicating the good's price sensitivity on the supply side.

Price Elasticity

The extent to which price adjustments impact the quantity of a good that consumers want to buy.

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