When the Federal Government Reinstated a 10% Excise Tax on Airline

Essay

When the Federal government reinstated a 10% excise tax on airline tickets, the industry wanted to pass on the full 10% ticket tax but was only able to boost fares by 4%.
(a) What can you conclude regarding the elasticity of demand for airline tickets?
(b) If you know that elasticity of demand is 2 and the elasticity of supply is 1, who bears the larger burden of the tax?
(c) Show the incidence of the tax graphically.