Answered

The term tax incidence refers to

A. The distribution of the tax burden between buyers and sellers.
B. The widespread view that taxes (and death) are the only certainties in life.
C. Whether the demand curve or the supply curve shifts when the tax is imposed.
D. Whether buyers or sellers of a good are required to send tax payments to the government.



Answer :

GinnyAnswer

Final answer:

Tax incidence in economics analyzes how taxes affect buyers and sellers based on demand and supply elasticities.


Explanation:

Tax incidence is the analysis of the effect of a specific tax on the distribution of economic welfare, focusing on the burden placed on either buyers or sellers in a transaction. The burden of a tax is determined by the price elasticity of demand and price elasticity of supply, rather than where the revenue is collected.

An example scenario would be a tax on wine, where the tax burden can be shared based on whether the demand or supply curve is elastic or inelastic, impacting who bears the larger portion of the tax.

Understanding tax incidence is crucial as it helps identify how different economic actors are affected by taxes, influencing market behavior and overall welfare distribution.


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