Figure 15.2

Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax

Question

Figure 15.2
  
Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax

Quizplus · Accepted Answer

If the supply curve is S₀, the consumer's burden of the tax is Pₐ - Pc, which is the vertical distance between the demand curve and the new supply curve after the tax is imposed. 
If the supply curve is S₁, the consumer's burden of the tax is Pb - Pc, which is the vertical distance between the demand curve and the new supply curve after the tax is imposed. 
Since S₀ is the more elastic supply curve, the burden on consumers will be greater under S₁ because producers have less ability to bear the burden of the tax and will pass more of the cost onto consumers.

Figure 15.2 Figure 15.2 Shows a Demand Curve and Two Sets of Curve