In the case of a specific tax the resulting price received by producers depends on
A) who pays the tax.
B) the price elasticity of supply.
C) the price elasticity of demand.
D) All of the above.

Question

Quizplus · Accepted Answer

The resulting price received by producers in the case of a specific tax depends on who pays the tax, the price elasticity of supply and the price elasticity of demand. If the tax is paid by the producer, the price received by the producer decreases by the amount of the tax, resulting in a decrease in supply. If the tax is paid by the consumer, the demand for the product decreases, resulting in a decrease in supply and price received by the producer. The price elasticity of supply and demand also determine the extent of the shift in supply and demand and therefore the resulting price received by producers. Therefore, all of the given choices (A, B, C) affect the price received by producers.

In the Case of a Specific Tax the Resulting Price