Question
1. Draw how the burden of the tax is distributed under the following scenarios:
a) Inelastic demand and elastic supply
b) Elastic demand and inelastic supply
c) Relative elasticities of demand and supply are similar
In each diagram, clearly label: equilibrium price before the tax, price paid by buyers after the
tax, price received by sellers after the tax, portion of tax burden on consumers, and portion of tax
burden on producers.
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Transcribed Image Text:1. Draw how the burden of the tax is distributed under the following scenarios: a) Inelastic demand and elastic supply b) Elastic demand and inelastic supply c) Relative elasticities of demand and supply are similar In each diagram, clearly label: equilibrium price before the tax, price paid by buyers after the tax, price received by sellers after the tax, portion of tax burden on consumers, and portion of tax burden on producers.
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