Which of the following statements is correct concerning the burden of a tax imposed on take-out food?
A)Buyers bear the entire burden of the tax.
B)Sellers bear the entire burden of the tax.
C)Buyers and sellers share the burden of the tax.
D)We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.

Question

Quizplus · Accepted Answer

The burden of the tax on take-out food is likely shared between buyers and sellers. The tax will cause the price of take-out food to increase, which will discourage some buyers from purchasing. This drop in demand will put downward pressure on the price that sellers can charge, which means they will also bear some of the burden of the tax. However, buyers will also have to pay more for their take-out food, so they too will bear some of the burden. It is unlikely that either buyers or sellers will bear the entire burden of the tax.

Which of the Following Statements Is Correct Concerning the Burden