FIGURE 18- 3
-Refer to Figure 18- 3. Suppose that supply is perfectly elastic and the price of this good is initially
P1. If an excise tax raises the price from P1 to P2, the direct burden of the tax is

Question

Quizplus · Accepted Answer

When supply is perfectly elastic, the entire burden of the tax falls on consumers. The direct burden of the tax is represented by the area between the initial price P1 and the new price P2, which is the area P1FBP2.

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