This is equal to the loss in welfare associated with an indirect tax.
The tax burden imposed on society will depend crucially on the elasticity of the demand curve facing the market. As the less price sensitive consumers are the more of the tax that can be passed onto them in the form of higher prices as it will increase their level of profit despite price rises due to a lack of drop-off in demand.
Below is a diagram to illustrate how the imposition of an indirect tax implaces a burden on society. In this instance the demand curve is neither inelastic or elastic and therefore the tax burden is split evenly between the consumers and producers. It implaces a burden on society equal to the combined amount of producer and consumer burden.
Below is a diagram to illustrate when the demand curve is inelastic and therefore the tax burden is split unevenly towards consumers ahead of producers. It implaces a burden on society equal to the combined amount of producer and consumer burden.
Below is a diagram to illustrate when the demand curve is elastic and therefore the tax burden on producers is small. It implaces a burden on society equal to the combined amount of producer and consumer burden. An elastic demand curve seems to implace the smallest burden on society due to the fact that the firm has to absorb most of the tax.
