Respuesta :
In order to determine the incidence of tax, it is necessary to determine the elasticity of demand and the elasticity of supply.
What is the incidence of tax?
Tax is when the government or an agency of the government levies a compulsory sum on the sales of goods and services. The incidence of tax refers to who bears the burden of the tax - the party that pays the tax.
What is the elasticity of demand?
Elasticity of demand measures how quantity demanded changes when prices changes. Demand can be elastic, inelastic or unit elastic.
If it is elastic, when prices change, quantity demanded changes more than the change in price. If demand is inelastic, when prices change, there is little or no change in the quantity demanded.
What is the elasticity of supply?
Elasticity of supply measures how quantity supplied changes when prices changes. Supply can be elastic, inelastic or unit elastic.
If supply is elastic, when prices change, quantity supplied changes more than the change in price. If supply is inelastic, when prices change, there is little or no change in the quantity supplied.
The relationship between price elasticity and tax incidence
The part with the more elastic demand or supply would bear less of the tax burden and the party with the less elastic demand or supply would bear more of the tax burden.
To learn more about price elasticity, please check: https://brainly.com/question/26054575
