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For Students · Laffer Curve

Laffer Curve for a cartel

Built for students learning it for a class or exam. See the concept move instead of memorizing formulas — and check your homework intuition. Simulate a cartel live below — adjust the inputs and watch it respond, right in your browser.

Laffer CurveLive

tax rate vs revenue

Controls

Presets

Behavioral response

Tax rate

At a 0% tax rate the government collects nothing; at 100% no one bothers to earn taxable income, so it also collects nothing. Somewhere between lies a revenue-maximizing rate — the peak of the Laffer curve. How responsive people are to taxes (the elasticity) sets where that peak falls. It is descriptive, not a policy prescription.

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Data Inspector

Revenue at rate0.278

Revenue-max rate55%

Zonebelow peak

Governing equation

R (t) = t B (t) = t (1 - t^{1.5}), \frac{d R}{d t}_{t^{*}} = 0, t = 0.35

Reading this result: Below the revenue-maximizing rate (≈55%) — the base is still large, so a modest rate increase collects more.

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Frequently asked questions

Is this good for students?: Yes — this version of "Laffer Curve for a cartel" is framed for students learning it for a class or exam. See the concept move instead of memorizing formulas — and check your homework intuition.
Do I need to install anything?: No. It runs in any modern browser, free, with no account required.