TITLE:
Developing an Economic Model for Donations: Theoretical Analysis and Policy Implication
AUTHORS:
Tin-Chun Lin
KEYWORDS:
Donations, Tax Return Rate, Sales Tax Rate, Price Elasticity of Demand, Consumer Behavior, Consumer Wellbeing
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.6,
August
27,
2019
ABSTRACT: In developing an economic model for public
donations, we applied the theory of consumer choice, and with the derived
model, verified two propositions: 1) higher price elasticity of demand for a
product may lead consumers to demand more for it but less for other products
given the total budget; and 2) a tax return rate based on donations positively
influences consumer well-being, while the sales tax rate negatively affects it.
After looking at the policy implications of public school finance, we suggest
that the government should increase the tax
return rate based on public donations instead of increasing sales tax
rate to collect more funding to finance public schools.