Final answer:
A per unit tax on buyers or sellers affects market outcomes such as tax incidence, market equilibrium, and tax elasticity. The burden of the tax depends on the relative elasticities of demand and supply, and the elasticity also determines the tax revenue generated.
Step-by-step explanation:
When a per unit tax is imposed on buyers or sellers, there are several market outcomes to consider including tax incidence, market equilibrium, and elasticity analysis. Tax revenue is represented graphically by the shaded area in supply and demand diagrams, calculated as the tax per unit multiplied by the total quantity sold, Qt. Tax incidence illustrates how the tax burden is shared between consumers and producers, which is dependent on the relative elasticities of demand and supply.
For instance, if the supply is more elastic than demand, consumers will carry a larger portion of the tax burden and vice versa. This affects market equilibrium, shifting the supply or demand curve depending on whether the tax is on buyers or sellers. In elasticity analysis, markets with more elastic demand and supply will see larger changes in quantity transacted due to a tax, often leading to lower tax revenues.