Use the following to answer questions:
Figure: Supply Tax
-(Figure: Supply Tax) In the accompanying pizza market, with a $2 tax imposed on the sellers, how much of the tax is paid by the buyers and how much of the tax burden is borne by the sellers?
A) Buyers pay all of the $2 tax.
B) Sellers pay all of the $2 tax.
C) Buyers pay $1.50 and sellers pay $0.50 of the tax.
D) Sellers pay $1.50 and buyers pay $0.50 of the tax.

Question

Use the following to answer questions:
Figure: Supply Tax 
-(Figure: Supply Tax) In the accompanying pizza market, with a $2 tax imposed on the sellers, how much of the tax is paid by the buyers and how much of the tax burden is borne by the sellers?
A) Buyers pay all of the $2 tax. 
B) Sellers pay all of the $2 tax. 
C) Buyers pay $1.50 and sellers pay $0.50 of the tax. 
D) Sellers pay $1.50 and buyers pay $0.50 of the tax.

Quizplus · Accepted Answer

The tax burden is shared between buyers and sellers depending on the elasticity of demand and supply. In this case, buyers pay $1.50 and sellers pay $0.50 of the $2 tax.

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