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The incidence of a tax is determined by:

A. Which side of the market is less sensitive to a change in price
B. Who pays the tax out of pocket
C. Whether the supply curve or demand curve shifts as a result of the tax
D. How much tax revenue it generates
E. The side of the market (buyers or sellers) the government taxes



Answer :

GinnyAnswer

Final answer:

Tax Incidence explains how taxes are divided between buyers and sellers based on demand and supply elasticity.


Explanation:

Tax Incidence describes how the burden of a tax is shared between buyer and seller. The incidence of a tax is determined by the price elasticity of demand and supply. If demand is inelastic relative to supply, the tax burden falls more on the buyer, whereas if demand is elastic relative to supply, the burden falls more on the seller.


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