Whether an excise tax is imposed on a demander or supplier is irrelevant because
A) in either case the price that the demander has to pay will decrease;while the price the supplier receives will increase
B) in either case the price that the demander has to pay will increase;while the price the supplier receives will decrease
C) either situation will create excess demand
D) either situation will create excess supply
E) none of these are correct

Question

Quizplus · Accepted Answer

Whether an excise tax is imposed on a demander or supplier is irrelevant because the incidence of the tax will be shared between the two parties. In both cases, the price that the demander pays (or receives, if the tax is refunded by the supplier) will increase, while the price that the supplier receives (or pays, if the tax is levied on them) will decrease. Therefore, the correct answer is B.

Whether an Excise Tax Is Imposed on a Demander or Supplier