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sakura1 Group Title

HOW DOES ELASTICITY OF DEMAND AND SUPPLY AFFECT TAX ?

  • 2 years ago
  • 2 years ago

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  1. Klanfer Group Title
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    Hum, I dont know if this is what your asking, but I know that when the government creates a tax, it will reduce the surplus both from the demandants and the suppliers. The question is: Who will suffer more after the tax is created? The answer is in the elasticity of their curves. If the demand curve is more inelastic relative to the supply curve, than the consumers will have a bigger loss of surplus. The contrary is true. If the supply curve is more inelastic compared to the demand curve, than after the tax, the producers will have a bigger loss. The rule is simple. The more inelastic part (Between demand and supply) will always have the bigger loss of surplus after the taxes.

    • 2 years ago
  2. sakura1 Group Title
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    THANKS ,I GOT IT ^ _ ^

    • 2 years ago
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