I saw the following sign at a gas station today:
It’s good to know the basic principles of microeconomics are still alive and well despite the crazy financial world.
As a refresher, no matter whether the government taxes the consumer or the producer, the tax burden will be split between the consumer and producer in a way that reflects the price elasticity of demand. I think we can guess how elastic the demand for cigarettes is, hence the buyer is paying most of the taxes.
Tags: econ, price elasticity of demand
First off, great picture.
Second, who did you get to write up this post?
1. Yeah, I was snapping the picture with my iPhone as quickly as I could so people wouldn’t think I was weird for taking a picture of the sign. Needless to say, the iPhone is no digital SLR.
2. Bite me.