Key points
Tax incidence is the manner in which the tax burden is divided between buyers and sellers.
The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax.
Tax revenue is larger...
Key points
Tax incidence is the manner in which the tax burden is divided between buyers and sellers.
The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax.
Tax revenue is larger...
Key points
Tax incidence is the manner in which the tax burden is divided between buyers and sellers.
The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax.
Tax revenue is larger...
Key points
Elasticity is a general term, referring to percentage change of one variable divided by percentage change of a related variable that can be applied to many economic connections.
Elasticity applies in labor markets and financial capital markets just as it does in markets for goods and services.
Cross-price elasticity of demand is the percentage change in...
Key points
Elasticity is a general term, referring to percentage change of one variable divided by percentage change of a related variable that can be applied to many economic connections.
Elasticity applies in labor markets and financial capital markets just as it does in markets for goods and services.
Cross-price elasticity of demand is the percentage change in...
Key points
Elasticity is a general term, referring to percentage change of one variable divided by percentage change of a related variable that can be applied to many economic connections.
Elasticity applies in labor markets and financial capital markets just as it does in markets for goods and services.
Cross-price elasticity of demand is the percentage change in...
Key points
In the market for goods and services, quantity supplied and quantity demanded are often relatively slow to react to changes in price in the short run, but they react more substantially in the long run.
As a result, demand and supply often—but not always—tend to be relatively inelastic in the short run and relatively elastic in the long run....
Key points
In the market for goods and services, quantity supplied and quantity demanded are often relatively slow to react to changes in price in the short run, but they react more substantially in the long run.
As a result, demand and supply often—but not always—tend to be relatively inelastic in the short run and relatively elastic in the long run....
Key points
In the market for goods and services, quantity supplied and quantity demanded are often relatively slow to react to changes in price in the short run, but they react more substantially in the long run.
As a result, demand and supply often—but not always—tend to be relatively inelastic in the short run and relatively elastic in the long run....
Key points
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded—or supplied—divided by the percentage change in price.
Elasticity can be described as elastic—or very responsive—unit elastic,...
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