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Posted about 2 months ago

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\$ 6; producer's tax incidence is $6\$ 6
(B) Consumer's tax incidence is $12\$ 12; producer's tax incidence is $0\$ 0
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Answer from Sia
Posted about 2 months ago
Consumer's Tax Incidence: The consumer's tax incidence is the difference between the price consumers pay after the tax (PtP_t) and the price they paid before the tax (PP). From the graph, Pt=10P_t = 10 and P=9P = 9. Therefore, the consumer's tax incidence is 109=110 - 9 = 1
Producer's Tax Incidence: The producer's tax incidence is the difference between the price producers receive before the tax (PP) and the price they receive after the tax (PtP_t). From the graph, P=11P = 11 and Pt=10P_t = 10. Therefore, the producer's tax incidence is 1110=111 - 10 = 1
Consumer's tax incidence is 1;producerstaxincidenceis1; producer's tax incidence is 1
Key Concept
Tax Incidence
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.

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