Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 15,000 cases of cola were sold every week at a price of $4 per case. After the tax, 9,000 cases of cola are sold every week; consumers pay $5 per case, and producers receive $1 per case (after paying the tax). The amount of tax on a case of cola is $___ per case. Of this amount, the burden that falls on consumers is $___ per case, and the burden that falls on producers is $___ per case.
Incidence of tax alludes to the dispersion of taxation rate among producers and consumer. By and large, the two customers and producers bear a part of the taxation rate whether or not the assessment is forced on deals or production. Who bears a greater segment of the weight relies upon whether supply or demand is more versatile.
The measure of the tax rate is the contrast between the price of consumer address and the price seller get, i.e., 5 - = $4.
The customer's burden of the tax = after price - before price
= 5 - 4 = $1.
The producer's weight of expense = distinction in price got before and after = 4 - 1 = $3.
The impact of expense on the amount sold depends not on whether the tax is forced on producers or customers, yet on whether demand is more elastic concerning price or supply is elastic. On the off chance that demand is more flexible, at that point forcing a tax on seller would have created a bigger drop in amount. Essentially, in the event, that supply is more versatile, at that point forcing a tax on purchasers would have created a bigger drop in amount.
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