Interactive simulator
Tax Incidence Simulator
Who really pays a tax? This simulator inserts a per-unit tax wedge between the demand and supply curves: the price buyers pay rises above the price sellers receive by exactly the tax amount. Make one curve steeper (more inelastic) and watch that side absorb more of the burden. You will also see the deadweight loss triangle — the trades that no longer happen. In this release this page is powered by the closest available interactive widget; a dedicated widget for this topic is planned.
Equilibrium solves Qd = Qs, so P* = (a − c) ÷ (b + d). Shifting demand changes a; shifting supply changes c. A ceiling only bites when set below P* (creating a shortage); a floor only bites when set above P* (creating a surplus).
How to use it
Set a per-unit tax amount with the slider.
Adjust the elasticity of demand and supply.
Read the buyer price and seller price to compute each side's burden.
Observe the deadweight loss triangle between the old and new quantities.
What you will learn
- Explain that tax incidence depends on relative elasticities, not on who writes the check.
- Compute buyer and seller burden from a tax wedge.
- Identify the deadweight loss from taxation.
Model notes
Constant elasticities and linear curves are assumed. The model ignores evasion, tax shifting through input markets, and administrative costs. It teaches incidence mechanics, not the revenue effects of real tax systems.