Tax incidence is A. the potential division of the burden of a tax between buyers and sellers in a market. B. the actual division of the burden of a tax between buyers and government in a market. C. the potential division of the burden of a tax between buyers and government in a market. D. the actual division of the burden of a tax between buyers and sellers in a market.

Question

Business

Mike Levy

17 December, 13:38

Tax incidence is A. the potential division of the burden of a tax between buyers and sellers in a market. B. the actual division of the burden of a tax between buyers and government in a market. C. the potential division of the burden of a tax between buyers and government in a market. D. the actual division of the burden of a tax between buyers and sellers in a market.

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Leslie · Answer 1

Tax incidence is the actual division of the burden of a tax between buyers and sellers in a market.

Explanation:

The division of the burden of the tax between the stakeholders that includes, buyers, sellers, consumers and producers is termed as incidence of tax or Tax incidence. The difference between the paid price and the initial equilibrium of price is the incidence of tax on the consumers. When the supply less elastic than demand then the producers will be bearing the cost of the tax.

The difference that lies between the initial equilibrium price and the price sellers will be receiving after payment of the tax is the tax incidence of sellers. The group of individuals who have the responsibility for the physical remittance of a particular tax to the government is referred as the Statutory incidence.