Relative Prices and Tax Policies: Some Preliminary Implications and Results

<p>One of De Viti de Marco's lasting contributions to economic theory is his demonstration that the effects of alternative taxes on relative prices can be analyzed as a reallocation of demand. His analysis of tax shifting starts by changing the resources available to the consumer — changing the budget constraint — while holding the supply schedules of taxed and untaxed commodities unchanged. Shifts in demand force a reallocation of resources, changing producers1 marginal cost, prices and the composition of output.</p>