The demand for and the supply of a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax burden falls on

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When a sales tax is imposed on sellers, the cost of the tax is typically split between buyers and sellers. Sellers may raise prices to cover part of the tax, leading buyers to pay more, while sellers absorb the rest of the tax in the form of reduced net revenue. This distribution of tax burden depends on the relative elasticities of demand and supply.

The Demand for and the Supply of a Good Are