The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:

Question

Quizplus · Accepted Answer

A tax wedge is the difference between the price a seller receives and the price a buyer pays in the presence of a tax. It represents the amount of the tax passed on to either the buyer or the seller or split between them. The other answer choices are incorrect. Tax differential refers to differences in tax rates between two regions or countries, tax incidence refers to the impact of a tax on different parties, and tax burden refers to the overall cost of a tax on society.

The Difference in the Price the Buyer Pays and the Price