Effect of a tax on price and quantity S + tax S O P1P1 Q1Q1 D P Q

S O P 1 + tax P1P1 P2P2 Q1Q1 Q2Q2 D P Q Effect of a tax on price and quantity S + tax

Incidence of tax: inelastic demand S + tax S O P1P1 Q1Q1 D P Q

O P 2 - t P1P1 P2P2 Q2Q2 Q1Q1 D CONSUMERS’ SHARE CONSUMERS’ SHARE PRODUCERS’ SHARE P Q Incidence of tax: inelastic demand S

Incidence of tax: elastic demand S + tax S O P1P1 Q1Q1 D P Q

O P 2 - t P1P1 P2P2 Q2Q2 Q1Q1 CONSUMERS’ SHARE CONSUMERS’ SHARE PRODUCERS’ SHARE PRODUCERS’ SHARE P Q Incidence of tax: elastic demand S D S + tax

Incidence of tax: inelastic supply S + tax S O P1P1 Q1Q1 D P Q

O P 2 - t P1P1 P2P2 Q2Q2 Q1Q1 D P Q CONSUMERS’ SHARE PRODUCERS’ SHARE Incidence of tax: inelastic supply S + tax S

Incidence of tax: elastic supply S + tax P Q O P1P1 Q1Q1 D S

P Q O P 2 - t P1P1 P2P2 Q2Q2 Q1Q1 CONSUMERS’ SHARE CONSUMERS’ SHARE PRODUCERS’ SHARE PRODUCERS’ SHARE Incidence of tax: elastic supply S + tax D S