Australia's Gambling Industries - Productivity Commission

q 0 p =
the quantity of gambling product consumed by problem gamblers after
adjusting for the effect on income of actually paying consumer surplus.
For ’normal’ level of consumption:
q1 p =
D1 p =
ε1 p =
p1 0 p =
the ‘quantity’ of gambling product consumed by problem gamblers at
the current price if they consumed at a 'normal' level.
the demand schedule for gambling products by problem gamblers if
they consumed at a 'normal' level.
the price elasticity of demand for gambling products by problem
gamblers if they were to consume gambling products in the same way
as recreational gamblers.
the price at which demand equals zero, assuming for simplicity a linear
demand schedule (D1 p ) for the 'normal' level of consumption.
The area [p(1+t) p *q1 p ] is the total expenditure (loss) by problem gamblers in a year
if they consumed at a 'normal' level.
The area [(p(1+t) p - p p )*q1p] is the total annual amount of tax revenue that would be
collected on the expenditure by problem gamblers if they consumed at a 'normal'
level.
D1 0 p =
q1 0 p =
the demand for gambling if gamblers were actually required to pay the
consumer surplus associated with consuming gambling products if they
consumed at a 'normal' level.
the quantity of gambling product consumed by problem gamblers after
adjusting for the effect on income of actually paying consumer surplus
if they consumed at a 'normal' level.
The Commission has calculated the benefit for problem gamblers as follows:
• the adjusted surplus on the 'normal' level of gambling (S1 0 p) [the triangular area
'a' in figure C.7]; plus
• the tax on the adjusted 'normal' level of gambling [the rectangular area 'b']; less
• expenditure on gambling by problem gamblers in excess of the adjusted 'normal'
level [areas 'c', 'd', 'e', and 'f']; plus
• the satisfaction gained from the 'excess' gambling [the triangular area 'c' and 'e'];
plus
• the tax collected on 'excess' spending [the rectangular area 'c' and 'd'].
ESTIMATING
CONSUMER SURPLUS
C.21