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5. How much of the tax is passed onto the consumers in the form of price increase, and how much is paid by the producers?
5. How much of the tax is passed onto the consumers in the form of price increase, and how much is paid by the producers? Indicate the producer and consumer burden on your graph. Refer to this example to help you. Price 01 0 Quantity You will note that the supply curve shifts left. Find the new equilibrium price (P1). Draw a straight line down to the xaxis. Where the line meets the original supply curve, draw a line to the y axis. The area beneath the original price line is the burden on the producer and the area above is the burden on the consumer burden. The level of burden of a tax on the producer or consumer depends on elasticity of demand
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