curve, where the new supply curve would intercept the demand at the new quantity Qt. For simplicity, Figure

5.10 omits the shift in the supply curve.

The tax revenue is given by the shaded area, which we obtain by multiplying the tax per unit by the total

quantity sold Qt. The tax incidence on the consumers is given by the difference between the price paid Pc and

the initial equilibrium price Pe. The tax incidence on the sellers is given by the difference between the initial

equilibrium price Pe and the price they receive after the tax is introduced Pp. In Figure 5.10 (a), the tax burden

falls disproportionately on the sellers, and a larger proportion of the tax revenue (the shaded area) is due to the

resulting lower price received by the sellers than by the resulting higher prices paid by the buyers. Figure 5.10

(b) describes the example of the tobacco excise tax where the supply is more elastic than demand. The tax
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