When a tax on a good is enacted:
A)buyers always bear the full burden of the tax
B)sellers always bear the full burden of the tax
C)buyers and sellers share the burden of the tax regardless of whom it is levied on
D)sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them

Question

Quizplus · Accepted Answer

When a tax on a good is enacted, the burden of the tax is shared by both buyers and sellers, regardless of whom it is levied on. The price of the good will increase, and as a result, buyers will purchase less of the good, while sellers will supply less of the good. The degree to which each side bears the burden of the tax will depend on the relative elasticities of supply and demand. However, in general, both buyers and sellers will be affected by the tax.

When a Tax on a Good Is Enacted