If consumers are paying $6.00 per unit, and if suppliers have to turn over $4.00 per unit in taxes, then the suppliers only keep $2.00 per unit as revenue, where they were earning $4.50 per unit before the tax.

    In this market, producers bear more of the tax burden than consumers. Their revenue per unit or producers' price falls from $4.50 to $2.00 per unit. The per-unit burden of the tax is $1.50 for consumers and $2.50 for producers.

    Next we ask: Is it typical for producers to bear most of the burden of such a tax, or do consumers often bear the largest share? What factors determine where the incidence of a tax falls?

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