Principles of Microeconomics / Unit 4 MIC 0322 short lesson, about 20 seconds
A Tax Drives a Wedge
Captions available
The idea
A per-unit tax puts a wedge equal to the tax between what buyers pay and what sellers keep. The market settles where buyers' quantity at the higher price equals sellers' at the lower.
In practice
The wedge is a vertical gap of the tax's height between the curves.
Where people slip
Neither curve is redrawn; the wedge works whichever side the law names as payer.
Your place on the trail
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Builds on
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