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Burden of Tax
7-3
$70,000
60,000
50,000
40,000
30,000
20,000
10,000
S0
Supplier pays
Demand
510
200
McGraw-Hill/Irwin
tax
Consumer pays
400
Demand is inelastic
S1
S0
Demand
590
400
tax S
0
60
50
40
510 600
$70
S1
S0
60
50
40
590
D0
D1
510
400
of
t
n
S
D
de
$70
n
$70
S
tax S
pe60
e
60
d
D
in x. 50
tax
50
s
i
a
n e t 40
D
40
e
h
rd s t
u
b y
x pa
0
510 600
0
a
T ho 510 600
Quantity of luxury boats
Quantity
of
luxury
boats
w
500 600
S1
tax
Demand is inelastic
Larger consumer burden
$70
Supplier pays
McGraw-Hill/Irwin
S0
Consumer pays
200
McGraw-Hill/Irwin
$70,000
60,000
50,000
40,000
30,000
20,000
10,000
200
tax
$70,000
Consumer pays
60,000
50,000
Supplier pays
40,000
30,000
20,000
10,000
Sales Taxes
Sales Taxes
As consumers increase purchases on the
internet where sales are not taxed, retail
stores will bear a greater burden of the sales
tax.