Impact of taxes and Deadweight loss

Statutuory Incidence of Tax
Refer to the tax obligation as stated by law, either on the byer or the seller.

Actual Incidence of Tax
Refer to the actual burden imposed by the tax upon buyers (who pay higher prices) and sellers (who receive less money).

Deadweight loss
Deadweight loss is resulted as less than efficient quantity of goods is produced and consumed.

How the legal burden of paying taxes is split between buyers and sellers?
Actual incidence of tax may differ from statutory incidence . Tax incidence is independent of whether imposing tax on consumption or production but depends on their elasticity.

• If the demand curve is relatively inelastic, the tax burden will mostly fall on buyers.
• If the supply curve is relatively inelastic, the tax burden will mostly fall on sellers.