1- If the government increases the tax on a good then the price paid by buyers w
ID: 1206085 • Letter: 1
Question
1-
If the government increases the tax on a good then the price paid by buyers will ______________ and the price sellers receive will _________________.
increase ; increase
increase ; decrease
decrease ; increase
d. decrease ; decrease
________________________________________________________
2-
It doesn't matter whether a tax is levied on the buyers or sellers of a good because _____________.
sellers always bear the full burden of the tax
buyers always bear the full burden of the tax
buyers and sellers will share the burden of the tax
d. neither buyers nor sellers will be burdened with the tax.
____________________________________________
a.increase ; increase
b.increase ; decrease
c.decrease ; increase
d. decrease ; decrease
________________________________________________________
2-
It doesn't matter whether a tax is levied on the buyers or sellers of a good because _____________.
a.sellers always bear the full burden of the tax
b.buyers always bear the full burden of the tax
c.buyers and sellers will share the burden of the tax
d. neither buyers nor sellers will be burdened with the tax.
____________________________________________
Explanation / Answer
If the government increases the tax on a good then the price paid by buyers will increase and the price sellers receive will decrease. The burden of the tax will always be shared between both buyers and the sellers. Depending upon the elasicity of demand and supply the burden will be shared between buyers and sellers.The price after tax will definitely increase the price paid by the buyers by the equal amount of burden of tax shifted by the sellers to buyers. On the other hand the price received by the sellers will go down.
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