of Edinburgh, Session 1871-72. 
625 
correspond to the relative suffering inflicted on the two parties, nor 
is it even the proportion in which the two parties lose by the loss 
of trade profit. The whole loss of either party is, as the diagram 
shows, always greater than the tax they pay. The relative total 
losses of the two communities as traders, are in proportion to the 
areas MCDM" and M'C'DM"; and these areas might approxi¬ 
mately, at least, be ascertained by experiments for this purpose, 
treating CD and C X D as straight lines, we only require to know the 
quantity and price of the goods before the imposition of the tax, 
and the quantity and price afterwards. 
Thus, if a tax of 2d. per pound were imposed on the trade in 
cotton between ourselves and America, if before the tax we imported 
500 million lbs. at one shilling, and after the tax 300 million lbs. 
for which we paid 13Jd., and the Americans received lljd., the 
total loss to the two communities as traders would be 600 + 200 = 
800 million pennies, the produce of the tax 600 million pennies. 
England would pay of the tax 450 million pennies. England’s 
total loss would be 600 million pennies. America would pay 
of the tax 150 million pennies. America’s total loss would be 
200 million pennies. The incidence would be the same whichever 
government levied the tax. 
It follows from the above principles, that if a holder sells unre¬ 
servedly, trusting to the competition between the buyers to produce 
the market, the whole tax falls on the seller; the supply curve 
becomes a vertical straight line. If a buyer buys unreservedly, 
the whole tax falls on him ; in this case the demand curve becomes 
a vertical straight line. 
Thus, if sales by auction were subject to a tax ad valorem or 
otherwise, and if sales were quite unreserved, the number of trans¬ 
actions not being altered, the prices would be unaltered, but the 
sellers would only get the prices minus the tax. 
This case does not practically arise, because, if auctions were 
really so taxed, although in each auction that occurred the sale 
might be unreserved, auctions would, as a whole, be checked; fewer 
people would put up their goods for sale in that way,—the prices 
would rise, the number of transactions would be diminished, and 
the tax would really be borne in part by the buyers and part by 
the sellers. 
