Bar Stool Economics Discussion

User Generated

cyhf123

Economics

Description

I have updated my all documents about this discussion. Please follow my requirements to finish this assignment. Appreciate!

Attachment preview

Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:  

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.  The ten men drank in the bar every day and seemed quite happy with the arrangement, until on e day, the owner threw them a curve.  'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.  

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men-the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33.  But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:  

The fifth man, like the first four, now paid nothing (100% savings).  
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free.  But once outside the restaurant, the men began to compare their savings.  

'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!' 

Unformatted Attachment Preview

This assignment requires you to read and discuss the article "Bar Stool Economics" How_tax_cuts_work.doc ). I expect you to discuss your thoughts, agreements, disagreements, questions, etc. for this and the remaining assignments. I am not looking for a specific length, rather an intelligent discussion of the material. The only requirement is for you to post as described above, you are not required to respond to anyone's post. However, the idea is to discuss these topics as a group. Bar Stool Economics Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this: The The The The The The The first four men (the poorest) would pay nothing. fifth would pay $1. sixth would pay $3. seventh would pay $7. eighth would pay $12. ninth would pay $18. tenth man (the richest) would pay $59. So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until on e day, the owner threw them a curve. 'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six menthe paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: The The The The The The fifth man, like the first four, now paid nothing (100% savings). sixth now paid $2 instead of $3 (33%savings). seventh now pay $5 instead of $7 (28%savings). eighth now paid $9 instead of $12 (25% savings). ninth now paid $14 instead of $18 (22% savings). tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. 'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!' 'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!' 'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!' 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!' The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia For those who understand, no explanation is needed. For those who do not understand, no explanation is possible
Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Running head: ECONOMICS

1

Bar Stool Economics
Student’s Name
Institutional Affiliation

ECONOMICS

2
Bar Stool Economics

Tax cuts have the effect of increasing demand in the economy, and when they are
implemented, it means that taxpayers have more money in their pockets. In bar stool
economics, the tenth man gets more from the tax cut because he puts in more and therefore
the system seems to favor individuals in relation to how much they put in. Since that seemed
to be the rule, it is uneth...


Anonymous
Great content here. Definitely a returning customer.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags