lo; 



ON THE PRINCIPLES WHICH REGULATE THE 

 INCIDENCE OF TAXES. 1 



IT is well known that many taxes do not fall ultimately on the 

 person from whom they are in the first instance levied. The 

 merchant advances the duties imposed on goods, but the tax 

 ultimately falls on the consumer. The problem of discovering 

 the ultimate or true incidence of each tax is one of great im- 

 portance, and of considerable complexity. The following paper 

 contains an investigation of the methods by which this incidence 

 may in some cases be experimentally determined, and of the 

 principles regulating the incidence in all cases these principles 

 being stated in a mathematical form. 



The author, in a paper published in Recess Studies, expressed 

 the law of supply and demand by representing what may be 

 termed the demand and supply functions as curves. The ordi- 

 nates parallel to the axis O X, Fig. 1 , were prices the co-ordi- 

 nates parallel to the axis Y were the supplies at each price, and 

 the demand at each price for the respective curves the market 

 price is then indicated by the ordinate x of the point at which 

 the curves intersect, this being the only price at which buyers 

 and sellers are agreed as to the quantity to be transferred. 



We might write the law algebraically as follows, calling y 

 the quantity of goods in the market, at each price x, we have y 

 = (f> (x); and calling y l the quantity of goods demanded at each 

 price, we have y\ = </>, (x) ; the market price is determined by the 

 equation y=y r There is, however, little or no advantage in 

 adopting this algebraic form, because we cannot suppose that in 

 any instance < (x) or <f> l (x) will be any tolerably simple algebraic 

 function, whereas the curve for given goods might be determined 



1 From Proceedings of the Royal Society of Edinburgh, Session 1871-2. 



