What to explore
Change parameters and watch the model adjust.
- Demand and supply intercepts and slopes
- Per-unit tax size
Intermediate price theory
Per-Unit Tax Incidence
A specific-tax model that shows the buyer-seller wedge, quantity contraction, tax revenue, and deadweight loss.
Focus
Buyer burden, seller burden, revenue, and deadweight loss
See how a per-unit tax alters prices on both sides of the market and divides the burden between buyers and sellers.Interactive diagram
Tax Incidence — explore it instantly
How to read this
A per-unit tax drives a wedge between the price buyers pay and the price sellers keep. Drawn here as the supply curve shifting up by the tax, the new equilibrium sits where supply + tax meets demand: buyers pay more, sellers receive less, and the quantity traded falls.
The shaded rectangle is tax revenue — the tax times the quantity sold. It is a transfer, not a loss. The shaded triangle between the taxed and untaxed quantities is deadweight loss: mutually beneficial trades that the tax prevents.
Who bears the tax depends on elasticity, not on who legally pays it. The steeper (less elastic) side of the market absorbs the larger share, because it is less able to escape the tax by changing quantity. Make demand steeper than supply and watch the buyers' share rise.
Core ideas
Interpret the mechanics before you chase the graphs.
- A tax wedge reduces traded quantity and reallocates surplus.
- Revenue is a transfer, while deadweight loss is surplus that disappears.
- Incidence depends on which side of the market is less able to adjust quantity.
Learning goals
What this model should help students internalize.
- Compute post-tax prices paid by buyers and received by sellers.
- Relate the tax wedge to revenue and deadweight loss.
- Connect incidence to the relative responsiveness of demand and supply.
Prerequisites
Concepts to review before diving in.
- Competitive equilibrium with demand and supply
- Basic surplus geometry
Open the full interactive notebook (Python · loads on demand)
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