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Taxes
- Intro Lesson: a11:06
- Intro Lesson: b8:14
- Intro Lesson: c11:00
Taxes
Lessons
Taxes
Tax Incidence: the division of tax burden between buyers and sellers.
When a good is taxed, then 3 things could happen:
- Price rises by the full amount of the tax.
- Buyers pay the tax - Price rise by a lesser amount than the tax
- Buyers and sellers share the burden of the tax - Price does not rise
- Sellers pay the tax
Effects of Taxes
Taxes on Sellers: Sellers treat taxes the same as an increase in production cost, so it shifts the supply curve leftward.

Conclusion: Buyers end up paying more because of tax, and sellers receive less money. There is deadweight loss.
Taxes on Buyers: Taxes make the item more expensive, so less people want to buy it. This causes the demand curve to shift leftward

Conclusion: Buyers end up paying more because of tax, and sellers receive less money. There is deadweight loss.
Tax Incidence and Elasticity of Demand & Supply
For a perfectly inelastic demand curve, buyers pay all the taxes

For a perfectly elastic demand curve, sellers pay all the taxes

For a perfectly inelastic supply curve, sellers pay all the taxes

For a perfectly elastic supply curve, buyers pay all the taxes

- IntroductionTaxes Overview:a)Tax Incidence
- The division of tax burden
- 3 Cases
b)Effects of Taxes- Taxes on Sellers
- Taxes on Buyers
- Conclusion
c)Tax Incidence and Elasticity of Demand & Supply- Perfectly inelastic demand curve
- Perfectly elastic demand curve
- Perfectly inelastic supply curve
- Perfectly elastic supply curve