Tax incidence means that:
A)government increases tax.
B)the tax was lifted from a particular good.
C)no more tax will be imposed on a particular good.
D)the share of the tax is paid by producers or sellers.

Question

Quizplus · Accepted Answer

Tax incidence refers to the distribution of the tax burden between buyers and sellers. When a tax is imposed on a good, the price of the good tends to increase, and this increase in price is usually shared between the consumers and the producers. The producers or sellers may bear a greater share of the tax burden if the demand for the good is relatively less elastic than the supply. Therefore, the correct choice is D - the share of the tax is paid by producers or sellers.

Tax Incidence Means That