Tax Incidence
Definition
Who actually bears the burden of a tax — not who writes the check. Depends on the relative elasticities of supply and demand.
Example
A tax on cigarettes is mostly paid by smokers because demand is inelastic.
Who actually bears the burden of a tax — not who writes the check. Depends on the relative elasticities of supply and demand.
A tax on cigarettes is mostly paid by smokers because demand is inelastic.