Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The burden is always equally shared regardless of elasticity.
B
The more inelastic the demand, the greater the burden on consumers.
C
Producers bear the entire burden of the tax.
D
The tax burden is irrelevant to market efficiency.
Understanding the Answer
Let's break down why this is correct
Answer
When a tax is imposed in a market, the burden of that tax is shared between consumers and producers. This means that both groups will feel the effects of the tax, but not equally. Typically, consumers may pay higher prices for goods, while producers receive less money for the same goods. For example, if a tax is added to a product like soda, consumers might pay $1. 50 instead of $1.
Detailed Explanation
When demand is inelastic, consumers cannot easily change their buying habits. Other options are incorrect because Some people think the tax burden is always split evenly; It's a common mistake to think producers always pay the tax.
Key Concepts
Tax Burden
Deadweight Loss
Elasticity of Demand
Topic
Tax Burden and Deadweight Loss
Difficulty
easy level question
Cognitive Level
understand
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