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Unformatted text preview: o Demand curve is horizontal WHAT IF THE TAX IS COLLECTED FROM BUYERS?-No difference in results-Shift demand down by the amount of the tax o Two prices, including and excluding the tax -Important Policy Result: in a competitive markets, it does not matter whether an excise tax is formally ANGEL INCIDENCE SUMMARY: PARTIAL-EQUILIBRIUM COMPETITIVE MARKETS-Burden is distributed btw buyers and sellers-The distribution of burden depends on the relative price elasticitys of demand and supply-The more an economic agent is willing to change behavior, the more the tax burden can be avoided o Agents with relatively inelastic demand or -ANGEL SPECIAL CASE: LAND TAX-Tax on land in a given jurisdiction (location)-Supply is perfectly inelastic -...
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- Spring '10