CS 4.2 BurdenTax

# CS 4.2 BurdenTax - O P C AB Total Tax Paid by Producers =...

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CLASS SUPPLEMENT # 4.2 (page 1 of 2) THE BURDEN OF TAXATION AND THE ELASTICITIES OF SUPPLY AND DEMAND Tax per unit sold = vertical distance between S NT and S T P O = Equil Price with no tax P C = Price paid by consumers after tax P P = Net price received by producers after tax = P C - Tax per unit. Burden of the Tax per unit: On consumers = P C - P O On producers = P P - P O Total Tax Paid to Government = (Tx per unit) X Q = AF X Q = Area P P P C AF Burden of the Total Tax: Total Tax Paid by Consumers = (P C - P O ) X Q = Area P

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Unformatted text preview: O P C AB Total Tax Paid by Producers = (P P- P O ) X Q = Area P P P O BF CS #4.2 (page 2 of 2) C For any given supply, the less elastic is demand, the larger the burden of the tax on consumers, or the more elastic is demand the greater the burden on producers. C For any given demand, the less elastic is supply, the larger the burden of the tax on producers, or the more elastic is supply the greater the burden on consumers. D:\ECON202\CS\CS 4.2 BurdenTax.wpd...
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## This note was uploaded on 02/13/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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CS 4.2 BurdenTax - O P C AB Total Tax Paid by Producers =...

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