When a tax is placed on the sellers of lemonade,

Question

Quizplus · Accepted Answer

The burden of the tax will be shared by both the buyers and the sellers, as the sellers may choose to raise the price of the lemonade to offset the cost of the tax. However, the division of the burden is not always equal and can vary depending on the elasticity of demand and supply for the lemonade. If the demand is more elastic than supply, then the burden may fall more on the sellers as buyers may choose to buy less lemonade due to the higher price. Conversely, if supply is more elastic than demand, then the burden may fall more on the buyers as sellers may choose to maintain their current price and take a hit on their profits.

When a Tax Is Placed on the Sellers of Lemonade