When a tax on a good is enacted,
A)buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.
B)buyers always bear the full burden of the tax.
C)sellers always bear the full burden of the tax.
D)sellers bear the full burden of the tax if the tax is levied on them;buyers bear the full burden of the tax if the tax is levied on them.

Question

Quizplus · Accepted Answer

When a tax is enacted, both buyers and sellers share the burden of the tax. The incidence of the tax (i.e. who bears the burden) depends on the elasticities of supply and demand. If demand is relatively elastic and supply is relatively inelastic, buyers will bear a smaller share of the tax burden, and vice versa. However, in general, both buyers and sellers are affected by the tax.

When a Tax on a Good Is Enacted