A tax wedge and who bears it
הוצג| English | משמעות |
|---|---|
| specific tax/spəˈsɪfɪk tæks/ | מס ספציפי (מס כמותי) |
| tax incidence/tæks ˈɪnsɪdəns/ | הטסת מס |
A decision you can investigate
- A tax is legally collected from sellers, but buyers can still pay part of its economic burden.
- Legal responsibility for remitting the tax does not settle who bears the price change.
Build the explanation
- A specific tax 从量税 creates a wedge: buyer price Pb minus seller receipt Ps equals tax t. Demand depends on Pb; supply on Ps. Government receipts are t times the quantity actually traded after the tax.
- Relative elasticities determine the price burden in the competitive model. The less responsive side tends to bear more because it has fewer effective ways to leave or adjust. An ad-valorem tax instead changes the cash wedge with taxable value; use its stated tax base.
Work through the evidence
- Initially Qd=120−2P and Qs=2P give P=30,Q=60. With tax 12, Pb=Ps+12. Solve 120−2(Ps+12)=2Ps: Ps=24, Pb=36 and Q=48.
- Buyers pay 6 more per unit; sellers receive 6 less. Government revenue = 12 × 48 = 576, not 12 × 60. CS=½ × (60−36) × 48=576; PS=½ × 24 × 48=576. Including revenue gives 1728 versus initial gains of 1800: the lost trades create loss 72 here, assuming no externality correction.
What is the seller’s post-tax receipt per unit?
רמת קושי 1/5 · 100 מטבעות + בונוס קטן בהשלמה הראשונה היום
Use the seller price in supply and Pb=Ps+12.
What is post-tax revenue?
רמת קושי 1/5 · 100 מטבעות + בונוס קטן בהשלמה הראשונה היום
12 × 48 = 576.
A tax legally remitted by sellers must be borne entirely by sellers.
רמת קושי 1/5 · 100 מטבעות + בונוס קטן בהשלמה הראשונה היום
Market-price adjustment can transfer part of the burden to buyers.
Test the limits
- The equal split comes from this symmetric model, not a universal tax rule. With relatively inelastic demand, buyers tend to bear more; with relatively inelastic supply, sellers tend to bear more. Perfectly inelastic supply is an extreme case of seller burden when demand is otherwise responsive.
- A tax can improve social allocation when it corrects an external cost; this no-externality arithmetic cannot establish that all taxes reduce welfare. Administration, evasion, revenue use and distribution also matter.
Which side normally bears more when its response is relatively inelastic?
רמת קושי 1/5 · 100 מטבעות + בונוס קטן בהשלמה הראשונה היום
Limited adjustment raises the economic burden on that side.
Apply and explain your answer
- Why is government revenue calculated on 48 units rather than 60?
- Only the post-tax traded quantity is taxed under the stated per-unit rule.
Match the terms to their meanings.
רמת קושי 2/5 · 140 מטבעות + בונוס קטן בהשלמה הראשונה היום
Use each term for its stated economic relationship.
Use the terms precisely
- tax incidence 税负归宿: The distribution of the economic burden of a tax.
- specific tax: A fixed tax amount per unit of a good.
Initially Qd=120−2P and Qs=2P give P=30,Q=60. With tax 12, Pb=Ps+12. Solve 120−2(Ps+12)=2Ps: Ps=24, Pb=36 and Q=48. Buyers pay 6 more per unit; sellers receive 6 less. Government revenue = 12 × 48 = 576, not 12 × 60. CS=½ × (60−36) × 48=576; PS=½ × 24 × 48=576. Including revenue gives 1728 versus initial gains of 1800: the lost trades create loss 72 here, assuming no externality correction.
The equal split comes from this symmetric model, not a universal tax rule. With relatively inelastic demand, buyers tend to bear more; with relatively inelastic supply, sellers tend to bear more. Perfectly inelastic supply is an extreme case of seller burden when demand is otherwise responsive. A tax can improve social allocation when it corrects an external cost; this no-externality arithmetic cannot establish that all taxes reduce welfare. Administration, evasion, revenue use and distribution also matter.
A specific tax creates a wedge: buyer price Pb minus seller receipt Ps equals tax t. Demand depends on Pb; supply on Ps. Government receipts are t times the quantity actually traded after the tax.
Write from a tax of 10
- Start from Qd = 100 - P and Qs = P. Add a specific tax of 10, with the buyer price equal to the seller receipt plus 10.
- Find the new prices, the quantity and the tax revenue. Do not tax the original 50 units.
Demand is Qd = 100 - P and supply is Qs = P. A specific tax of 10 makes the buyer price equal to the seller receipt plus 10. Find both prices, the quantity and the tax revenue.
Only units traded after the tax are taxed. The legal duty to send the money is not the same as this price split.
Why is tax revenue 450 rather than 500?
רמת קושי 1/5 · 100 מטבעות + בונוס קטן בהשלמה הראשונה היום
Quantity falls from 50 to 45. Revenue uses 45. The equal split is a result of these two curves.