Question

In: Economics

A tax a. lowers the price buyers pay and raises the price sellers receive. b. raises...

A tax

a.

lowers the price buyers pay and raises the price sellers receive.

b.

raises the price buyers pay and lowers the price sellers receive.

c.

places a wedge between the price buyers pay and the price sellers receive.

d.

Both b) and c) are correct.

Solutions

Expert Solution

Answer: d) Both b) and c) are correct

A tax raises the price buyers pay and lowers the price sellers receive, places a wedge between price buyers pay and sellers receive.

Tax burden is not just on one person. Both the buyer and seller shares the burden of tax based on the elasticity of demand and supply. Buyers pays high price and sellers receives lower price.


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