Asked by Deija Williams on Jul 16, 2024
Verified
In general,the incidence of an excise tax is shared between buyers and sellers.
Sellers
Individuals or entities that offer goods or services for sale in the marketplace.
Excise Tax
A tax charged on specific goods, services, and activities, often included in the price of the product.
Buyers
Individuals or entities that acquire goods or services in exchange for monetary payment.
- Gain insight into the nature of tax incidence and the allocation of tax responsibility among consumers and merchants.
Verified Answer
JM
Judith MartinezJul 19, 2024
Final Answer :
True
Explanation :
When an excise tax is imposed on a product, the price of the product increases for buyers. This leads to a decrease in the quantity demanded. At the same time, the tax eats into the profit margins of sellers. As a result, both buyers and sellers bear some of the burden of the tax. The extent to which each group bears the burden depends on the relative elasticities of demand and supply.
Learning Objectives
- Gain insight into the nature of tax incidence and the allocation of tax responsibility among consumers and merchants.