DragIT - Incidence of tax
In this interaction, drag the end of the demand curve up and down to see the impact of a change in the elasticity of demand on the tax revenue received by the government and the incidence of the tax on the firm and on the consumer. The tax revenue is the sum of the two areas - consumer share and firm share.
In this next interaction, drag the end of the supply curve up and down to see the impact of a change in the elasticity of supply on the tax revenue received by the government and the incidence of the tax on the firm and on the consumer. Again, the tax revenue is the sum of the two areas - firm and consumer.
1 |
Incidence of taxThe more elastic the demand curve the lower the consumers share of the tax will be. |
2 |
Incidence of taxThe more inelastic the supply curve the lower the producer share of the tax will be. |
3 |
Incidence of taxThe more inelastic the demand curve the higher the producer share of the tax will be. |