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April 05, 2005
Who Pays a Sales Tax?
We started our discussion of simultaneous equations models with a classic example.
The basic diagram has two supply curves, one for the price paid by the consumer (with tax) and one for the price received by the supplier (without tax).
The supply curve comes from the Theory of the Firm. This analysis leads to Q on the horizontal axis.
Who pays the sales tax depends on the slopes of the supply and demand curves.
Posted by bparke at April 5, 2005 09:10 PM