An excise tax introduces a wedge between the price consumers pay, Pc, and the price producers receive, Pp. The vertical distance between them is the tax per unit; Pe is the equilibrium price before the tax, and Qt the quantity sold with it. The shaded rectangle, the tax per unit times Qt, is the tax revenue.
In (a) demand is elastic and supply inelastic, as with beachfront hotels: consumers have other vacation choices but sellers cannot move their businesses. The tax incidence on consumers, Pc minus Pe, is smaller than the incidence on producers, Pe minus Pp. In (b) supply is elastic and demand inelastic, as with cigarettes: the incidence on consumers is the larger share. The more elastic the demand and supply curves, the lower the tax revenue.