Figure 6-17

-Refer to Figure 6-17. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

Question

Figure 6-17
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-Refer to Figure 6-17. If the government places a $2 tax in the market, the buyer bears $1 of the tax burden.

Quizplus · Accepted Answer

When a government imposes a tax in a market, the tax burden is typically shared between buyers and sellers depending on the elasticities of supply and demand. If the question states that the buyer bears $1 of the tax burden, it implies that the tax incidence has been split in such a way that consumers are paying part of the tax through higher prices. This can happen regardless of the initial tax amount, as the actual division of the tax burden depends on how the market adjusts to the tax.

Figure 6-17 ​

Figure 6-17