When a tax is placed on sellers:

Question

Quizplus · Accepted Answer

When a tax is placed on sellers, the price that buyers pay increases and the amount that sellers receive decreases. The incidence of the tax is shared by both buyers and sellers, with the specific split determined by the relative elasticities of supply and demand. However, the magnitude of the tax on buyers and sellers is the same as it would be for a tax on the buyers, but in the opposite direction. Therefore, the effect on the price buyers pay and sellers receive equals that of a tax on buyers.

When a Tax Is Placed on Sellers