@EvolLove it’s economics-speak for who actually pays. suppose (oversimplifying) there’s a foreign exporter and domestic buyer. the government can tax 10% of the exporter’s sales, or it might tax the consumer the same 10%. economists mostly think those choices are close to equivalent. 1/

@EvolLove if consumers are much more motivated to buy the good than the exporter to sell (“inelastic demand”), a tax on the exporter will mostly be passed on to the consumer in the form of higher prices. 2/

@EvolLove if consumers are very price-sensitive in how much they buy, while producers are motivated to produce (say they have a factory, investment in which has already covered most of the cost of producing a certain large quantity), that’s “inelastic supply”, and even if structured as a 10% sales tax on the consumer, the producer is likely to reduce its selling price to maintain the quantity sold. 3/

@EvolLove in a nutshell, when demand is much less “elastic” (price-sensitive) than supply, however the tax is structured, the consumer is likely to pay for it, while when supply is much less elastic than demand, producers are likely to pay for it. 4/

@EvolLove many goods will sit between these extremes, with both producers and consumers price-sensitive to some degree. in that case, the incidence will be shared. perhaps the producer will drop prices by 4% and the consumer ends up paying a tax of 6% to cover the total 10% tax. so, in this case, the “tax (or tariff) incidence” falls 40% on the producer and 60% on the consumer. /fin