The demand curve for pizza is downward sloping and the supply curve is upward sloping. If the government imposes a $2 tax on a pizza, ________ the tax.
A)only consumers pay
B)only producers pay
C)both producers and consumers pay
D)neither producers nor consumers pay
E)the government pays

Question

Quizplus · Accepted Answer

Both producers and consumers will end up paying the tax. Producers will have to pay the tax on every pizza they make and consumers will have to pay a higher price, which includes the tax. The actual division of the tax burden between producers and consumers will depend on the elasticity of demand and supply, but in general, both parties will end up sharing the burden.

The Demand Curve for Pizza Is Downward Sloping and the Supply