reduces the number of inframarginal
consumers in the market and thereby
This switch from the cash cliff to the $1-for-$2 deal makes existing SSDI benefits (including health care coverage) inframarginal
, thereby worsening the rate at which beneficiaries would be willing to exchange more work for more dollars.
Permanent marginal rate cuts are likely to have a larger effect than temporary, inframarginal
Nonetheless, the tax does affect the firm's budget: while inframarginal
firms can afford to pay it, some marginal firms which just break even before the tax will be driven out of the market.
The usual lesson drawn from such examples is that above-competitive wage rates certainly reduce investment and employment at the margin, but that if labor cartels are careful about setting wages (a big if) they can capture firms' quasi-rents on inframarginal
investments without further adverse effects.
Medicare is an inframarginal
payer for these physicians, suggesting that they have "exhausted" their implicit Medicare demand.
As the original demand curve in Figure 3 shifts toward the right, given system, capacity at 78 units, the short-run opportunity cost is no longer the inframarginal
cost ($1/BU) of producing the inframarginal
(78th) unit, but rather, it is simply the foregone opportunity to consume.
In particular, restricting the total number of transactions by setting higher interchange fees raises total welfare if the gain in surplus of the marginal card user who now starts using his card, along with all those merchants who accept his card, exceeds the loss in surplus of the inframarginal
merchant who now stops accepting cards, along with all those card users who can no longer use their cards for purchases at her store.
Moreover, even if the costs of extra drug use are offset in aggregate, employers will typically realize a worse financial profile because they pay a larger share of inframarginal
In Quigley's words, "most of the housing market effects are inframarginal
9) Second, for those who save more than their total tax-preferred contribution limit (as in the case of the heavy saver in Table 1), the change in inframarginal
rates of return has no effect on the marginal saving decision; it acts simply to transfer wealth to these households.
Since high tax rates on inframarginal
income do not impact work decisions, they raise revenue for redistribution without any efficiency cost.