Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 6 - Supply, Demand, and Government Policies - Questions For Review - Page 129: 7

Answer

Burdens of tax are shared between buyers and sellers and this is determined by elasticity! The ability to leave the market is the central idea. For example, if the firm was selling a unique product then buyers bear the greater burden because they demand a product and cannot change the situation; they cannot simply leave the market.

Work Step by Step

This questions asks you to identify how sellers and buyers respond. Think elasticity then identify how each participant ( seller or buyer) can respond.
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