Applications of rational choice and demand theories
3 important questions on Applications of rational choice and demand theories
The legal incidence of the tax is:
Whether the buyer or seller is responsible for paying the tax to the government.
The economic incidence of the tax is:
The respective share of the tax borne by buyers and sellers through the tax's effect on the price of the good. The relative price elasticity of demand and supply determines how the burden will he shared.
Specific pricing scheme's in amusement parks, tennis clubs or telephone companies, are often called two-part pricing. This pricing scheme:
Consists of a fixed fee and a marginal charge for each unit purchased (also called two-part tariffs). Their effect is to transfer a portion of the consumer surplus from the buyer to the seller.
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