FIGURE 18- 3
-Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P3. If an excise tax raises the price from P3 to P4, the direct burden of the tax is

Question

Quizplus · Accepted Answer

Since supply is perfectly elastic, the entire burden of the tax will be passed onto consumers in the form of a higher price. Therefore, the direct burden of the tax on producers is zero.

FIGURE 18- 3 -Refer to Figure 18- 3. Suppose That Supply Is Perfectly