Sunday, 8 March 2009

ECO review:tax ......demand

From the chart we can obviously see that when the demand for a product is elastic,and we draw the supply curve with tax.The supply price is higher(p1-p2),producers pay more,and quantity for this product is lower than before(q1-q2)


In this case,when the demand for the product is inelastic,supply price is higher with tax (p1-p2).Consumers pay more,and the quantity for this product is decreased,but not as same as when the demand is elastic.

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