-Refer to the information above to answer this question.If the government imposes a $2 per unit sales tax on this product,how much of that tax will consumers pay and how much will sellers pay?
A)Consumers will pay all $2 of the tax.
B)Consumers will pay $1.50 and sellers $.50.
C)Consumers and sellers will each pay $1.
D)Consumers will pay $.50 and seller $1.50.
E)Sellers will pay all $2 of the tax.

Question

-Refer to the information above to answer this question.If the government imposes a $2 per unit sales tax on this product,how much of that tax will consumers pay and how much will sellers pay?
A)Consumers will pay all $2 of the tax. 
B)Consumers will pay $1.50 and sellers $.50. 
C)Consumers and sellers will each pay $1. 
D)Consumers will pay $.50 and seller $1.50. 
E)Sellers will pay all $2 of the tax.

Quizplus · Accepted Answer

The incidence of a tax, or how much is paid by consumers and sellers, depends on the elasticities of supply and demand. Without specific information on these elasticities, the standard economic assumption is that the tax burden is shared between consumers and sellers, making option C, where consumers and sellers each pay $1, the most neutral and commonly accepted answer in a general context.

-Refer to the Information Above to Answer This Question