Who will bear the burden of a $0.05 tax placed on soda suppliers (consumer or seller)in a soda market where Qd = 225-10P and Qs = 50 + 15P?
A) Consumers pay $0.30 of the tax, bearing the burden.
B) Consumers pay $0.25 of the tax, bearing the burden.
C) Sellers pay $0.20 of the tax and bear the burden.
D) Sellers pay all of the tax and bear the burden.

Question

Quizplus · Accepted Answer

The tax incidence falls more heavily on the side of the market with the less elastic demand curve. In this case, the demand curve is more elastic than the supply curve, so consumers will bear more of the burden of the tax.

Who Will Bear the Burden of a $0