If the government imposes a $500 excise tax on SUVs, suppliers of SUVs will simply raise the price by $500 and consumers will bear the entire burden of the tax.

Question

Quizplus · Accepted Answer

The burden of a tax is typically shared between suppliers and consumers depending on the price elasticity of demand and supply. If demand is elastic, consumers will bear less of the tax burden, and if it is inelastic, they will bear more.

If the Government Imposes a $500 Excise Tax on SUVs