Author Question: What is meant by tax incidence? Is the entire burden of the tax always borne by those on whom it is ... (Read 16 times)

V@ndy87 · **on:** Jun 29, 2018

What is meant by tax incidence? Is the entire burden of the tax always borne by those on whom it is imposed?

What will be an ideal response?

Question 2

Juanita goes to the Hardware Emporium to buy a new circular saw. She is willing to pay 120 for a new saw, but buys one on sale for 85. Juanita's consumer surplus from the purchase is

A) 35. B) 85. C) 120. D) 205.

lorealeza · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Tax incidence refers to how the burden of the tax is distributed across various agents in the economy. The tax burden is not necessarily borne by those who are legally obligated to pay the tax. The tax burden falls more heavily on the side of the market that is less elastic. When supply is more elastic than demand, the tax burden falls more heavily on buyers. When demand is more elastic than supply, the tax burden falls more heavily on sellers.

Answer to Question 2

A