624 
Proceedings of the Royal Society 
the tax per unit of goods, then OM is the market price to the 
supplier, OM' the market price to the buyer and the difference 
Mm' is equal to the tax. 
The total amount raised by the tax from the transactions repre- 
sented in the diagram, is measured by the area MCC'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'M'M". The 
whole loss entailed by the tax on the two communities is measured 
by the area MCDC'M' ; the loss to the sellers is measured by the 
area CDM"M ; the loss to the buyers by the area M"DC'M' ; 
both buyers and sellers suffer a loss beyond the tax they pay. This 
excess of loss is represented by the area CC"D for the sellers, and 
C'C"D for the buyers. 
If the tax be large, the line CO' will approach the axis OX, the 
tax will be unproductive, and the area CC'D representing the excess 
of injury to the buyers and sellers will be large, compared with the 
produce of the tax. This fact is one justification of free trade. 
There is a certain magnitude of tax which will produce the 
maximum revenue or value for the area MCO'M'. The ratio in 
which the tax falls, in one sense, on sellers and buyers is simply 
the ratio of the diminution of price obtained by the sellers to the 
increase of price paid by the buyers. 
It is absolutely clear that this is the proportion in which the tax 
is actually paid by the two parties, although this may by no means 
