In the final analysis,tax incidence

Question

Quizplus · Accepted Answer

Tax incidence ultimately depends on the forces of supply and demand. While the legislated burden sets the initial parameters of the tax, the equilibrium price ultimately determines how much of the tax burden is passed on to the buyer versus the seller. The more elastic the supply and/or demand, the more the burden will be shifted onto the other party. Therefore, tax incidence cannot be entirely random nor fall entirely on buyers or sellers, as it depends on the relative elasticity of the market.

In the Final Analysis,tax Incidence