If a good is elastic, such as jewelry, and a tax is imposed The buyer and...

If a good is elastic, such as jewelry, and a tax is imposed The buyer and the seller will share the tax burden The seller pays the tax, in total The buyer pays the tax, in total Demand will increase

Solutions

Expert Solution

Seller pays the tax

The elasticity of demand and supply curve decides whether buyer will pay tax or consumer will pay or both will share. Whichever curve is inelastic that will pay more as it changes quantity quite less because of large change in price.

If demand curve is elastic, the tax burden will be borne by producers only as shown below.

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

If the tax is imposed on a good where the elasticity of demand is greater than...

If the tax is imposed on a good where the elasticity of demand is greater than elasticity of supply show with the help of an illustration whether the producer or consumer will bear greater burden of the tax.

If a tax is imposed on sellers of a good, who is more affected- buyers or...

If a tax is imposed on sellers of a good, who is more affected- buyers or sellers? Can the buyers avoid the tax altogether? Use a diagram to explain.

42.) True or False? An excise tax imposed on the sellers of a good has exactly...

42.) True or False? An excise tax imposed on the sellers of a good has exactly the same effects as one of equal size imposed on the buyers. (1 point) 43.) True or False? An excise tax imposed on the sellers of the good will raise the price paid by buyers, reduce the price received by sellers, and reduce the quantity bought and sold. (1 point) 44.) True or False? An excise tax creates a tax wedge between the price...

Suppose the government imposed an excise tax of $1 per unit on a good. Suppose further...

Suppose the government imposed an excise tax of $1 per unit on a good. Suppose further that the price elasticity of demand for the good is 2 and the price elasticity of supply for it is 3. 1.) What percentage of the tax will be borne by the buyers? 2.) What percentage of the tax will be borne by the sellers? 3.) The price buyers pay for the good after the tax is levied will be _____ than the price...

Say good X tends to be a relatively price-elastic good (demand is more price elastic than...

Say good X tends to be a relatively price-elastic good (demand is more price elastic than supply). Say the government imposes an excise tax on every unit of X buyers buy. The burden of this tax will probably fall more heavily on: sellers (gas stations) hard to say both sellers and buyers equally buyers

1)A sales tax is imposed on the sellers of gasoline. This tax shifts A the supply...

1)A sales tax is imposed on the sellers of gasoline. This tax shifts A the supply of gasoline curve rightward. B.the demand for gasoline curve leftward. C.the supply of gasoline curve leftward. D.both the supply curve of gasoline and demand curve for gasoline leftward. 2) in general, a fine on selling a product leads to the A.demand curve shifting leftward. B.supply curve shifting rightward. C.supply curve shifting leftward. D.demand curve shifting rightward 3) A natural monopoly occurs when A.a few...

Tax incidence. Determine graphically the incidence (on buyers and sellers) of a unit tax imposed on...

Tax incidence. Determine graphically the incidence (on buyers and sellers) of a unit tax imposed on sellers. Show how changes in demand elasticity change the relative incidence.

Assume a proportional tax is imposed on wage. Given that the amount of tax revenue remains...

Assume a proportional tax is imposed on wage. Given that the amount of tax revenue remains constant, the government plans to stop imposing a proportional tax in favour of a lump sum tax on wage in order to increase labour supply. Can the government achieve its goal? Use a diagram to show the effects.

Wayne Corporation is subject to State A's franchise tax. The tax is imposed at a rate...

Wayne Corporation is subject to State A's franchise tax. The tax is imposed at a rate of 1.2% of the corporation's net worth that is apportioned to the state by use of a two-factor formula (sales and property factors, equally weighted). The property factor includes real and tangible personal property, valued at historical cost as of the end of the taxable year. Forty percent of Wayne's sales are attributable to State A, and $600,000 of the cost of Wayne's tangible...

A good is more elastic when * a. it is easy to produce more at the...

A good is more elastic when * a. it is easy to produce more at the same cost b. it is made from rubber c. it is difficult to produce more at the same cost d. the marginal cost is equal to the price

Subjects