What to explore
Change parameters and watch the model adjust.
- Demand and supply intercepts and slopes
- Per-unit tax size with sensitivity to slope changes
Intermediate price theory
Elasticity and Tax Incidence
A tax-incidence model that emphasizes equilibrium elasticities and sensitivity of the tax burden to demand and supply slopes.
Focus
Elasticity, tax burden shares, and sensitivity analysis
Compare how buyer and seller tax shares move as demand or supply becomes more or less elastic.Core ideas
Interpret the mechanics before you chase the graphs.
- The less elastic side of the market bears more of the tax burden.
- Incidence is about behavioral responsiveness, not statutory assignment.
- Sensitivity analysis makes the elasticity-incidence link visible over a range of parameter values.
Learning goals
What this model should help students internalize.
- Compute equilibrium elasticities for linear demand and supply.
- Relate elasticity to tax burden shares across buyers and sellers.
- Read sensitivity plots that show incidence changes as slopes change.
Prerequisites
Concepts to review before diving in.
- Tax incidence in a competitive market
- Interpretation of price elasticity at a point
Next models to study
Keep moving through the track.
Advanced microeconomics
Consumer Choice and Indifference Curves
Adjust tastes, prices, and income to compare interior and corner solutions, then track how optimal bundles and indirect utility move.
Advanced microeconomics
Competitive Firm and Cost Curves
Move productivity, fixed costs, and output prices to see how marginal cost, average cost, and profit-maximizing output respond.