Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

 
 
 
Figure 15.4 
Here it appears that tax P
1
R per unit is divided between 
buyers and sellers in the proportion of P
1
M and MR respectively. 
Since P
1
M is greater than MR the buyers bear a higher burden, as 
the price rises by R
1
M. 
Pr ice
Quantity
1
P
P
S
1
S
M
R
Q
1
Q
D
O
Pr ice
Quantity
1
P
P
S
1
S
M
R
Q
1
Q
D
O

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(iv) 
If the degree of elasticity of supply is less than the elasticity 
of demand (i.e. es > ed), that is to say, when supply is 
relatively inelastic but demand is elastic, then the greater 
incidence will fall upon the sellers as the price will rise less 
than fifty percent tax per unit. 
 
 
 
 
Figure 15.5 
In the above figure, it appears that tax P
1
R per unit is divided 
between buyers and sellers in the proportion of P
1
M and MR 
respectively. MR is the sharing of tax burden by sellers which is 
much higher than P
1
M the buyers share. And the price rises slightly 
by P
1
M only. 
(v) When the demand is perfectly elastic and the supply inelastic, 
the whole incidence will be on the seller. 
 
 
 
 
 
Figure 15.6 
In the above figure, D represents the demand curve denotes 
the perfect elasticity of demand. S curve is the original supply curve