This graph illustrates a good where a tax has been imposed on the buyers of that good.
A tax on buyers of a good

What is the consumer's tax incidence and what is the producer's tax incidence?

Choose 1 answer:
(A) Consumer's tax incidence is $\$ 6$; producer's tax incidence is $\$ 6$
(B) Consumer's tax incidence is $\$ 12$; producer's tax incidence is $\$ 0$

Question

This graph illustrates a good where a tax has been imposed on the buyers of that good.
A tax on buyers of a good

What is the consumer's tax incidence and what is the producer's tax incidence?

Choose 1 answer:
(A) Consumer's tax incidence is $\$ 6$; producer's tax incidence is $\$ 6$
(B) Consumer's tax incidence is $\$ 12$; producer's tax incidence is $\$ 0$

Accepted Answer

∻Solution∻ ‖ a ⋮ Consumer's Tax Incidence: The consumer's tax incidence is the difference between the price consumers pay after the tax ($P_t$) and the price they paid before the tax ($P$). From the graph, $P_t = 10$ and $P = 9$. Therefore, the consumer's tax incidence is $10 - 9 = 1$. ‖ ‖ b ⋮ Producer's Tax Incidence: The producer's tax incidence is the difference between the price producers receive before the tax ($P$) and the price they receive after the tax ($P_t$). From the graph, $P = 11$ and $P_t = 10$. Therefore, the producer's tax incidence is $11 - 10 = 1$. ‖ ∻Answer∻ ⚹ Consumer's tax incidence is $1; producer's tax incidence is $1 ⚹ ∻Key Concept∻ ⚹ Tax Incidence ⚹ ∻Explanation∻ ⚹ Tax incidence refers to the distribution of the tax burden between consumers and producers. In this case, both consumers and producers share the tax burden equally, each bearing $1 of the tax. ⚹◊What is the formula for calculating consumer surplus in Microeconomics using the given information on the graph?⍭ Generate me a similar question◊

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