ECO101H1 Lecture Notes - Sales Tax, Demand Curve, Canada Pension Plan
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ECO101H1 Full Course Notes
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Include consumer demand theory final topic, assign 4. Sales tax is usually levied on seller. Incidence of tax does not depend upon whether tax is levied on buyer or seller. The demand curve shifts vertically downwards by the amount of the tax. Price paid by buyer 95+10 = 105. Tax incdence and elasticities of demand and supply. 2) tax levied on sellers (since incidence is the same when levied on buyer or seller) Demand elasticities and the incidence of a tax. text to be paid by seller, perfectly inelastic demand. Buyers pays: p1 = po + 10 (full incidence) Seller receive: p1 - 10 = (p0 +10) - 10 = po (no change) 1) buyers are completely unresponsive to changes in price. 2) full burden (incidence) of tax is borne by buyers. Seller receives: p1-10 = p0-10 (full incidence) 1) buyers very responsive to change in price (quantity demanded falls to zero for any increase in price)
