three-fourths of the burden, and sellers bear one-fourth of the burden. b. one-half of the burden, and sellers bear one-half of

Question

3 years ago

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three-fourths of the burden, and sellers bear one-fourth of the burden. b. one-half of the burden, and sellers bear one-half of

the burden. c. two-thirds of the burden, and sellers bear one-third of the burden. d. one-fourth of the burden, and sellers bear three-fourths of the burden.

Business

1 answer:

zubka84 [21] · Answer 1 · 2021-12-28T00:51:35+03:00

The correct option is: For each unit of the good that is sold, buyers bear <u>one-half of the tax burden and sellers bear one-half of the tax burden.</u>

<u>Explanation</u>:

Incidence of tax is a term referred in economics which deals with division of taxes. Tax incidence refers to division of tax among the buyer and seller for a product. The tax incidence is related to the price elasticity of supply and demand.

When a product is sold, the buyer of the product is charged with one-half of the tax burden and the seller of the product bears the other-half of the tax burden.

The incidence of tax can be observed in two ways:

i) Formal incidence

ii) Effective incidence