Answer:
The correct answer is option a.
Explanation:
The imposition of tax on tea will create a tax wedge. The price paid by the buyers will increase and the price received by sellers will decrease. The tax burden will be shared between the buyers and sellers.
Who shares the major portion of the tax burden depends on their response to price change. Whoever has a more inelastic response to the price change will bear the major share of the tax burden. But the welfare of both buyers and sellers will get reduced.
