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Question
Microeconomics
Posted 9 months ago
What area represents the consumers' tax incidence?
A market where a tax has been imposed
Choose 1 answer:
(A)
(B)
(C)
(D)
(E)
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Answer from Sia
Posted 9 months ago
Solution
a
Definition of Tax Incidence: Tax incidence refers to the distribution of the tax burden between buyers and sellers
b
Graph Analysis: In the given graph, the tax incidence on consumers is represented by the area between the demand curve (D) and the new supply curve (Stax), up to the quantity sold after the tax is imposed
c
Identifying the Area: The area labeled represents the consumers' tax incidence because it is the area between the demand curve (D) and the new supply curve (Stax) up to the new equilibrium quantity
Answer
Key Concept
Tax Incidence
Explanation
The consumers' tax incidence is the portion of the tax burden that falls on consumers, represented by the area between the demand curve and the new supply curve up to the new equilibrium quantity. In this graph, it is labeled as .
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