Demand, supply and policy
| English | 中文 | Pinyin |
|---|---|---|
| tax incidence/tæks ˈɪnsɪdəns/ | 税负归宿 | shuì fù guī sù |
| price elasticity/praɪs ɪlæˈstɪsɪti/ | 价格弹性 | jià gé tán xìng |
A decision you can investigate
- A tax raises the cost of a popular drink. Sellers and buyers both bear part of the burden.
- The legal taxpayer is not necessarily the person bearing the economic burden.
Build the explanation
- Demand and supply determine market equilibrium; elasticity measures responsiveness.
- A specific tax shifts supply upward by the tax per unit in the standard competitive model.
Match the terms to their precise meanings.
Use these definitions in the particular context of Demand, supply and policy.
Work through the evidence
- If consumers pay 12 after a tax and producers receive 9, the tax wedge is 3. Compared with an original price of 10, buyers bear 2 and sellers bear 1.
- Consumer payment equals producer receipt plus the tax: 12 = 9 + 3.
Who bears more of this tax compared with the original price?
If consumers pay 12 after a tax and producers receive 9, the tax wedge is 3. Compared with an original price of 10, buyers bear 2 and sellers bear 1. Consumer payment equals producer receipt plus the tax: 12 = 9 + 3.
Which caution belongs to this particular task?
Tax incidence depends on relative elasticities, not who sends the payment to government. Evaluate effects on output, revenue, stakeholders and equity; behavioural assumptions can change responses.
The explanation in this lesson makes a conditional claim; relevant context and evidence still matter.
Evaluate effects on output, revenue, stakeholders and equity; behavioural assumptions can change responses.
Test the limits
- Tax incidence 税负归宿 depends on relative elasticities, not who sends the payment to government.
- Evaluate effects on output, revenue, stakeholders and equity; behavioural assumptions can change responses.
Choose the two statements supported by this lesson.
The concept and worked evidence support these claims; the stated limits rule out the universal shortcut.
Apply and explain your answer
- Who bears more of this tax compared with the original price?
- Consumers bear 2 per unit, while producers bear 1.
Use the terms precisely
- tax incidence: How the economic burden of a tax is shared.
- price elasticity 价格弹性: Responsiveness of quantity to a price change.
If consumers pay 12 after a tax and producers receive 9, the tax wedge is 3. Compared with an original price of 10, buyers bear 2 and sellers bear 1. Consumer payment equals producer receipt plus the tax: 12 = 9 + 3.
Tax incidence depends on relative elasticities, not who sends the payment to government. Evaluate effects on output, revenue, stakeholders and equity; behavioural assumptions can change responses.
Demand and supply determine market equilibrium; elasticity measures responsiveness.