Asked by Angela Trevino on Jun 04, 2024
Verified
When the inelasticities of demand and supply are equal,the tax burden will be borne
A) entirely by the seller.
B) mostly by the seller.
C) equally.
D) mostly by the buyer.
E) entirely by the buyer.
Inelasticities
A measure of the sensitivity, or lack thereof, of one variable to a change in another variable, typically used in economics to describe situations where changes in price have little to no effect on supply or demand.
Tax Burden
The total amount of taxes paid by individuals or businesses relative to their income, often analyzed to assess the impact of taxation on economic behavior.
- Scrutinize the effects that taxation has on market outcomes, especially in terms of changes in prices and quantities.
- Ascertain the conditions that decide the tax burden allocation between buyers and sellers.
Verified Answer
PS
Pawan sidhuJun 08, 2024
Final Answer :
C
Explanation :
When the inelasticities of demand and supply are equal, the tax burden is shared equally between the buyer and the seller. This means that both parties are affected equally by the tax and neither can avoid paying it entirely. However, it is worth noting that this assumes that the market is perfectly competitive, and that there are no other factors, such as government subsidies or externalities, that could impact the incidence of the tax.
Learning Objectives
- Scrutinize the effects that taxation has on market outcomes, especially in terms of changes in prices and quantities.
- Ascertain the conditions that decide the tax burden allocation between buyers and sellers.