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Elasticity and Excise Taxes Who ends up paying for an excise tax?. 1. EXCISE TAX ON CIGARETTES . P. Demand- Inelastic Supply- Unitary. $10 8 6 5 4 2. S. CS. $2 TAX on Producers. D. 8. 10. Q. 2. EXCISE TAX ON CIGARETTES . P. S 1. $10 8 7 6 5 4 2. S. CS After.

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Elasticity and excise taxes who ends up paying for an excise tax

Elasticity and Excise TaxesWho ends up paying for an excise tax?

1


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON CIGARETTES

P

Demand- Inelastic

Supply- Unitary

$10

8

6

5

4

2

S

CS

$2 TAX on Producers

D

8

10

Q

2


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON CIGARETTES

P

S1

$10

8

7

6

5

4

2

S

CS After

$6.50 =Pconsumers

Amount Consumers Pay

$2 TAX on Producers

$4.50 = Pproducers

Amount Producers Pay

D

9

10

Q

Quantity Doesn’t Fall VERY Much!!!

3


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON YACHTS

P

Demand- Elastic

Supply- Unitary

$10

8

6

5

4

2

S

$2 TAX on Producers

D

8

10

Q

4


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON YACHTS

P

S1

$10

8

6

5

4

2

S

$2 TAX on Producers

Pc

DWL?

Pp

D

10

Q

7

Quantity Falls A lot!!!

5


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON CIGARETTES

P

S1

$10

8

7

6

5

4

2

S

CS After

Pconsumers =$7

  • Tax per Unit?

  • Total Tax Revenue?

  • Tax paid by consumers?

  • Tax paid by producers?

  • Total spending?

  • Revenue for businesses?

Pproducers = $4

D

20

30

Q

6


Elasticity and excise taxes who ends up paying for an excise tax

EXCISE TAX ON CIGARETTES

P

S1

$10

8

7

6

5

4

2

S

CS After

Pconsumers =$7

  • Tax per Unit = $3

  • Total Tax Revenue = $60

  • Tax Paid by Consumers = $40

  • Tax Paid by Producers = $20

  • Total Spending = $140

  • Revenue for Businesses=$80

Pproducers = $4

D

20

30

Q

7