/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q.20 Under which circumstances does t... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 5: Q.20 (page 130)

Under which circumstances does the tax burden fall entirely on consumers?

Short Answer

Expert verified

If the supply curve is completely elastic (horizontal curve) under which circumstances tax burden falls entirely on consumers.

Step by step solution

01

Definition

Tax Incidence: The final burden of tax, or the final incidence of tax, is referred to as tax incidence. Taxes can be imposed on both consumers and producers. The elasticity of demand and supply of the good determines the tax burden share.

02

Explanation

The tax burden is always higher on the less elastic side. As a result, if the supply curve is fully elastic, the demand curve is perfectly elastic as well (horizontal curve). When a tax is imposed, the supply curve shifts upward, raising consumer prices. Here the providers keep getting the same price as before, while the entire tax burden falls on consumers. If the demand curve's elasticity is between 0 and 1, and the supply curve is completely elastic, the supply curve bears the entire tax burden. As a result, if the supply curve is fully elastic, the demand curve is perfectly elastic as well (horizontal curve).

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

From the data in Table 5.6 about the supply of alarm clocks, calculate the price elasticity of supply from point J to point K, point L to point M, and point N to point P. Classify the elasticity at each point as elastic, inelastic, or unit elastic.

If demand is elastic, will shifts in supply have a larger effect on equilibrium quantity or on price?

When someone鈥檚 kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the price

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about the elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain

What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.