Gregory Mankiw

Real GDP growth is a good indicator to measure economic progress. The level of real GDP is a good indicator for measuring economic well-being.

GDP measures two things: the total income of people in the economy and the total costs of producing goods and services in the economy. For an economy, total revenue must be equal to total cost.

The tax makes the buyers pay more for the goods and the sellers get a lower price. The analysis shows that the tax costs for buyers and sellers are more than the tax revenue of the government.

The relationship between income and product elasticity: take museum ticket price! If museum ticket is elastic, you will loose a considerable bunch of the museum income. If not, increasing the ticket price, you earn more money!