Question: Does It Matter Whether Buyers Or Sellers Are Legally Responsible For Paying A Tax?

When a good is taxed the burden of the tax falls mainly on consumers if?

Answer and Explanation: The party with a lower price elasticity will bear a larger fraction of the tax burden.

Hence if demand is inelastic and supply is elastic, then consumers will bear most of the tax burden..

When a tax is imposed in a market it will?

When a tax is imposed on a market it will reduce the quantity that will be sold in the market. As we learned in a previous lesson, whenever the quantity sold in the market is not the equilibrium quantity, there will be inefficiencies.

What is the difference between a tax paid by buyers and a tax paid by sellers?

A tax paid by buyers shifts the demand curve, while a tax paid by sellers shifts the supply curve. However, the outcome is the same regardless of who pays the tax. … A tax on a good raises the price buyers pay, lowers the price sellers receive, and reduces the quantity sold.

What four characteristics do economists believe a tax should possess?

Four characteristics make tax a good tax and they are: certainty, equity, simplicity and efficiency. Certainty is characteristics by which every tax payer must be certain how much tax does he or she own, when payment of tax is due and how it should be paid.

When the government places a tax on a product the cost of the tax to buyers and sellers?

65 Cards in this SetWhen a tax is imposed on a good, the equilibrium quantity of the good alwaysdecreases.When the government places a tax on a product, the cost of the tax to buyers and sellersexceeds the revenue raised from the tax by the government63 more rows

Why do we see taxes as a burden?

More likely, we think of taxes as a burden because we’re not quite certain what it is we’re buying when we pay them. We miss, somehow, the connection between our tax dollars and the fire protection, the highways, the security against foreign powers and the biomedical research that our dollars buy.

Who should carry the burden of taxation?

The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax. Tax revenue is larger the more inelastic the demand and supply are.

What happens to consumer and producer surplus when the sale of a good is taxed?

When the sale of a good is taxed, both consumer surplus and producer surplus decline. The decline in consumer surplus and producer surplus exceeds the amount of government revenue that is raised, so-society’s total surplus declines.

What is the impact of a production tax on the equilibrium price?

The effect of the tax on the supply-demand equilibrium is to shift the quantity toward a point where the before-tax demand minus the before-tax supply is the amount of the tax. A tax increases the price a buyer pays by less than the tax. Similarly, the price the seller obtains falls, but by less than the tax.