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Suppose the City of Anaheim places a tax on tickets to see the Anaheim Ducks play....

Suppose the City of Anaheim places a tax on tickets to see the Anaheim Ducks play. Describe the change the change in supply and the effect of the tax burden.

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Answer #1

There is a tax on the tickets which means the tax will result in a decrease in supply of tickets. This causes the supply curve to shift to the left as there are fewer tickets sold as a result of tax.

As the supply curve is shifted to the left the price that consumers will be paying is increased and the price that the Anaheim Ducks will be receiving will be reduced. The tax incidence is the sharing of the tax burden between the consumers and the producers. In this case the price for consumers is increased and the price for Anaheim Ducks decreases but not by the full amount of tax. Instead the tax burden is shared between them

The tax burden will depend upon the elasticity of demand and supply. The side of the market with greater elasticity bears smaller tax burden and the less elastic side will be contributing more to the tax.

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