A tax collected from buyers has an equivalent impact to a same size tax collected from sellers.

Question

Quizplus · Accepted Answer

According to the theory of tax incidence, the burden of a tax is ultimately determined by the relative price elasticity of supply and demand. However, in a perfectly competitive market, the tax burden will be shared equally between buyers and sellers regardless of which party the tax is collected from. Therefore, a tax collected from buyers has an equivalent impact to a same size tax collected from sellers.

A Tax Collected from Buyers Has an Equivalent Impact to a Same