If government imposes an excise tax on a good and the tax burden is borne equally by buyers and sellers,then
A)price elasticity of demand is unitary.
B)price elasticity of supply is unitary.
C)the absolute values of price elasticities of demand and supply are equal.
D)None of the above

Question

Quizplus · Accepted Answer

If the tax burden is shared equally by buyers and sellers, then the price paid by buyers would increase and the price received by sellers would decrease by the same amount. This indicates that the relative change in quantity demanded and quantity supplied would also be identical, thus the absolute values of price elasticities of demand and supply are equal.

If Government Imposes an Excise Tax on a Good and the Tax