Mineral tax will live shorter. On top of that tax revenues for the government would be low, too. That leads to a Laffer curve-shaped function of tax revenue for the government, in which the “optimal level of taxation” is somewhere in the middle. Any mineral tax must be neutral. Neutral is defined as maintaining incentives for investors to exploit minerals. Therefore, the revenues must exceed the costs. Furthermore, the government must be able to rely on the amount of tax money it receives, therefore, the tax imposed must be as certain and as steady as possible. Often, governments decide to use a
Contract curve the initial allocations. The analysis cannot say which particular point along the contract curve they will end up at — this depends on the two people's bargaining skills. In the case of two goods and two individuals, the contract curve can be found as follows. Here formula_1 refers to the final amount of good 2 allocated to person 1, etc., formula_2 and formula_3 refer to the final levels of utility experienced by person 1 and person 2 respectively, formula_4 refers to the level of utility that person 2 would receive from the initial allocation without trading at all, and formula_5