Thread: Survivor 14
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Old 05-14-2007, 11:21 AM   #137
Alex
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Yeah, I'm aware of it, but if we want to get in the nitty gritty of it all, price elasticity isn't the only major factor to take into account. 2 applie pies at McDonald's are going to have a base cost of $1, no matter what the tax environment (and for reasons that have nothing to do with price elasticity; demand will not fall significantly if they charge $1.05 instead of $1.00). So in this case, the full tax weight is born by the consumer.

The more perfect the marketplace in question, and therefore the more perfectly margins have been driven out of pricing, the more perfectly the tax will be a direct burden on the consumer. So the price impact of taxes will vary quite a bit from product to product but will be most felt in low-margin products with rigid production costs.
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