Tax Incidence on Consumers in Supply-Demand Diagram

Steps:

• Locate pre-tax equilibrium at intersection of supply and demand curves.
• After tax, supply shifts up by tax amount, creating new equilibrium at lower quantity Q₂.
• Consumer surplus loss includes the tax burden: area between original demand and new price paid by consumers.
• Identify rectangular area from original price P to new consumer price, across quantity Q₂, matching tax per unit times quantity.

Why D is correct:

• PJEF is the rectangle representing tax per unit (vertical shift) times quantity consumed (base), equaling total tax paid by consumers per economic incidence definition.

Why the others are wrong:

• A. HPFG: Represents producer surplus loss, not consumer tax burden.
• B. HJEG: Captures deadweight loss triangle from reduced transactions.
• C. POEQ₂: Denotes total quantity reduction area, unrelated to tax payment.

Final answer: D