AP Microeconomics Chapter 6 Taxes

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6 Terms

1
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Tax incidence

The manner in which the tax burden is shared among buyers and sellers

2
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Tax incidence with elastic demand

Sellers take on more of the burden

3
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Tax incidence with inelastic demand

Buyers take on more of the burden

4
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Tax incidence with elastic supply

Buyers take on more of the burden

5
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Tax incidence with inelastic supply

Sellers take on more of the burden

6
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What are the two generalizations we can take away from tax incidence graphs?

  1. Governments like taxing goods with inelastic demand

  2. The more in elastic, the more tax that side of the market takes. Inelastic supply is a absorbed by the sellers while inelastic demand is absorbed by buyers.