Tax Incidence and Market Equilibrium

This topic examines the economic theory of tax incidence, focusing on how the burden of a tax is distributed between buyers and sellers in a market, and how this distribution is affected by the elasticity of demand and supply. Tertiary students will learn to analyze the impact of government taxation on market equilibrium, price levels, and quantity traded, using linear demand and supply models. The discussion extends to scenarios involving substitute goods and their implications for tax burden sharing. For Zambian university and college students studying economics, this topic is vital for understanding fiscal policy, market interventions, and their welfare implications. It bridges theoretical microeconomics with practical policy analysis, relevant to Zambia's context of commodity markets like cotton and tobacco. Mastering tax incidence prepares learners for examinations in applied economics and equips them with skills to assess the real-world consequences of taxation—a key competency for careers in economic advisory, revenue authority roles, and policy development within Zambia's tertiary-educated workforce.