Can someone help me to explain this graph and who has tax incidence more?? In which, the vertical axis means wage per hour and the horizontal axis means the number of labor hours supplied per year. And how about in the long term?
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1 Answer
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From the graph, we see that labour supply is perfectly inelastic, while labour demand has a (negative as usual) non-zero elasticity.
When only one of the parties is perfectly inelastic, they perceive the full tax burden.
Therefore, workers will perceive all the tax burden, while employers will perceive none of it.
answered Jul 20 at 17:17