a) what is meant by the incidence of a tax? b) Suppose a tax is placed on land. Describe its incidence.

Incidence of a tax refers to the identification of who actually bears the burden of a tax. In other words, tax incidence determines how the tax burden is distributed between producers and consumers. It shows how much of a tax is paid by each party involved (consumers pay in the form of higher prices, while producers pay through lower profits or wages).

When a tax is placed on land, its incidence refers to how the tax burden is shared between landowners and other parties, such as tenants or customers. The incidence can depend on several factors, such as the elasticity of demand and supply for land and the market structure. 1. Analyzing land supply and demand elasticity: The incidence of a land tax will depend on the relative elasticities of supply and demand for land. Elasticity indicates the responsiveness of supply or demand to a change in price. In the case of land, the supply is generally considered to be perfectly inelastic since the quantity of land is fixed. On the other hand, demand for land can be elastic, reflecting how sensitive buyers and renters are to changes in land prices. 2. Distribution of the tax burden: Since the supply of land is inelastic, when a tax is imposed, the landowners would usually end up bearing the greater portion or sometimes the entire burden of the tax. This is because they cannot change the supply of land in response to the increased cost resulting from the tax. The landowners would try to pass on the tax burden to renters or customers by charging higher rent or prices for their goods and services. But, since the demand for land is elastic, consumers or renters may respond by reducing their demand for land, leading to an equilibrium where the landowners bear most of the tax burden. In summary, when analyzing the incidence of a tax on land, consider the elasticities of supply and demand for land and how the tax burden will be distributed among landowners, tenants, and customers. In general, the burden of a land tax falls primarily on landowners due to the inelastic nature of land supply.