Suppose that an excise tax of $2 per head of lettuce and a sales tax of $3 per head of lettuce were simultaneously imposed. Show that the combined economic incidence of these taxes will be the same as the economic incidence of either the pure 5? sales tax or the pure 5? excise tax.
Can you please explain how to solve this question?
(Graphical image is very appreciated)
[NEAS: The excess tax affects the supply curve; the sales tax affects the demand curve. For an excise tax of $2, increase the price in the supply curve; for a sales tax of $3, decrease the price in the demand curve. Equate supply and demand to get the equilibrium price. This gives the same result as a $5 sales or excise tax. for the graphic, just move the demand or supply curves down or up by the amount of the tax.]