ECON 1100 Chapter Notes - Chapter 4.3: Indirect Tax
23 Apr 2016
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Taxes on goods sold: excise taxes (4. 3) An indirect tax charged on the sale of a particular good (cigarettes, alcohol and gasoline) The sellers deliver the taxes to the government (not the consumers) They will try to shift the burden of the tax on the consumers. The new point of equilibrium will be at a lower demand. The burden will not be able to be completely shifted to the consumers. Tax revenue (government) = 0. 10 x 1. 93 x 105 dozen = ,300. Burden on consumers = 2/3(19,300) = ,867. Burden on sellers = 1/3(19,300) = $ 6433. Relatively inelastic (d): very steeply negative (unresponsive to changes in price) Change in quantity demanded is very small compared to any large change in price. Relatively elastic (s): not as steep, positive (responsive to changes in price) The higher the inelasticity of d, the higher the burden on the consumers! The units of measurements between the two is not the same.
