When a tax is imposed on an item, it can generally be said that the incidence of the tax is
A)entirely on the buyer.
B)entirely on the seller.
C)on both the buyer and seller.
D)not determined in this manner.

Question

Quizplus · Accepted Answer

Generally, the incidence of a tax is shared between the buyer and seller. The tax will increase the price paid by the buyer and reduce the revenue received by the seller. The exact distribution of the tax burden between the buyer and seller depends on the elasticity of demand and supply. If the demand is more elastic than supply, the burden falls more on the seller, and if supply is more elastic than demand, the burden falls more on the buyer.

When a Tax Is Imposed on an Item, It Can