When a tax is imposed on the producers of a product, if the tax is levied on producers, the producers bear the burden of the tax; if the tax is levied on consumers, the consumers bear the burden of the tax.

Question

Quizplus · Accepted Answer

The burden of a tax, also known as tax incidence, can be shared between producers and consumers regardless of whom the tax is officially levied on. The actual distribution of the tax burden depends on the price elasticity of supply and demand for the product.

When a Tax Is Imposed on the Producers of a Product