(Figure: Market for Timber) Refer to the figure which shows the market for timber. Which of the following statements is correct?
A)The incidence of the tax on the buyer is 10% and on the seller is 90%.
B)The incidence of this tax is greater on the buyer.
C)The incidence of this tax is 50% on the buyer and 50% on the seller.
D)The incidence of this tax is greater on the seller.

Question

(Figure: Market for Timber) Refer to the figure which shows the market for timber. Which of the following statements is correct? 
A)The incidence of the tax on the buyer is 10% and on the seller is 90%. 
B)The incidence of this tax is greater on the buyer. 
C)The incidence of this tax is 50% on the buyer and 50% on the seller. 
D)The incidence of this tax is greater on the seller.

Quizplus · Accepted Answer

The incidence of the tax falls on the party with the less elastic demand or supply, meaning that they are less responsive to changes in price. In this case, the supply curve is steeper than the demand curve, indicating that the sellers are less responsive to price changes than the buyers. Therefore, the incidence of the tax is greater on the sellers.

(Figure: Market for Timber) Refer to the Figure Which Shows