THE INCIDENCE OF TAXES 113 



trade, levied as a fixed sum per unit of goods, as one pound per 

 ton, or one shilling per gross. 



The effect of such a tax is to produce a constant difference 

 between the price paid by the buyer and the price received by 

 the seller. The market prices are determined in the diagram of 

 the supply and demand curves, by the points between which a 

 line parallel to X, and equal in length to the tax, can be fitted 

 between the two curves. 



Thus, if in Fig. 3, F N be the demand curve, and P E the 

 supply curve, and if the length of the line C C' be the amount of 

 the tax per unit of goods, then M is the market price to the 



supplier, O M' the market price to the buyer, and the difference 

 M M' is equal to the tax. 



The total amount raised by the tax from the transactions 

 represented in the diagram, is measured by the area M C C'M'. 

 The portion paid by the seller is measured by the area CC"M"M. 

 The portion paid by the buyer is measured by the area C"C A M'M". 

 The whole loss entailed by the tax on the two communities is 

 measured by the area MOD C'M' ; the loss to the sellers is mea- 

 sured by the area C D M"M ; the loss to the buyers by the area 

 M"D C'M' ; both buyers and sellers suffer a loss beyond the tax 

 they pay. This excess of loss is represented by the area C C"D 

 for the sellers, and C'C"D for the buyers. 



If the tax be large, the line C C' will approach the axis O X, 

 the tax will be unproductive, and the area C C'D representing the 

 VOL. II. I 



