Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The tax burden is uniformly absorbed by all consumers regardless of demographic factors.
B
Higher-income consumers are less sensitive to changes in tax burden compared to lower-income consumers.
C
Tax burden has no impact on purchasing decisions among consumers.
D
The tax incidence is solely determined by the government's tax policies without considering consumer demographics.
Understanding the Answer
Let's break down why this is correct
Answer
The tax burden refers to the financial load that taxes place on individuals and businesses, which can influence how different demographic groups spend their money. When taxes increase, people often have less disposable income, meaning they might cut back on non-essential purchases. For example, if a middle-income family faces higher sales taxes, they may decide to skip dining out or delay buying new clothes. Different groups react differently; lower-income households might feel the pinch more severely because they spend a larger portion of their income on basic needs. This shows that tax incidence, or who ultimately bears the cost of a tax, can lead to changes in consumer behavior based on income and spending habits.
Detailed Explanation
Higher-income consumers can handle tax changes better than lower-income consumers. Other options are incorrect because This idea suggests everyone feels the same tax impact, which isn't true; This option says taxes don't matter for buying choices, but they do.
Key Concepts
tax burden
demographic impact
tax incidence
Topic
Tax Burden and Consumer Behavior
Difficulty
hard level question
Cognitive Level
understand
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