This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 1% change in quantity demanded, in relation to healthcare. This is because in almost all circumstances, no matter what happens, consumers need health insurance regardless of the expense. The graph below illustrates the more burden falls on consumers due to the more inelastic the burden becomes. In addition, it illustrates that the producer surplus in regard to the lost due to sales tax is less than the consumer surplus lost. In order for the government to make sure that the burden of the tax does not fall on the consumer and rather falls on the producer would be to set a price ceiling. If a price ceiling were to be set at equilibrium before the $10 sales tax would be imposed, then the consumers would not be burdened. This would also guarantee that prices would not rise....
View Full Document
- Spring '08