Using supply and demand analysis, which of the following is true ?
A) The burden of a tax on production cannot be determined on the basis of who actually pays the tax.
B) The burden of a tax on production is always split evenly between consumers and sellers.
C) Consumers bear the entire burden of a per unit tax on production.
D) Sellers bear the entire burden of a per unit tax on production.

Question

Quizplus · Accepted Answer

The burden of a tax on production depends on the elasticities of supply and demand, not on who officially pays the tax. This means the actual economic incidence of the tax can fall on both consumers (through higher prices) and producers (through lower revenues), in proportions that depend on the relative price sensitivities of supply and demand.

Using Supply and Demand Analysis, Which of the Following Is