Question

Suppose the government in your city imposes a $0.50 excise tax on gasoline. The burden of this tax falls on: a) sellers of gasoline b) buyers of gasoline c) the city government d) both buyers and sellers

Answer 1

The burden of this tax falls on both buyers and sellers.

What is the burden of tax?

Burden of tax refers to who pays for the tax imposed by the government. The people who bear the burden of tax is both the buyer and seller of the good.

The party with the more elastic demand bears more burden of tax. Whole the party with the less elastic demand bears less burden of tax.

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