Graphically explain tax incidences (who bears the burden)under the following scenarios:
a)Perfect inelastic supplycurve and normal demand curves
b)Perfect inelastic supplycurve and normal demand curves
c)The demand curve is perfect elastic and tax is imposed on producers
a) In this scenario, the tax burden is shared equally between the consumers and producers. The price of the good will increase by the amount of the tax, and the quantity of the good will remain the same. This is illustrated in the graph below:
b) In this scenario, the tax burden is borne entirely by the consumers. The price of the good will increase by the amount of the tax, and the quantity of the good will remain the same. This is illustrated in the graph below:
c) In this scenario, the tax burden is borne entirely by the producers. The price of the good will remain the same, but the quantity of the good will decrease by the amount of the tax. This is illustrated in the graph below: