Can the incidence of a sales tax ever be so that buyers pay all of the tax or so that sellers pay all of the tax?

What will be an ideal response?


Yes, each is possible. If demand is perfectly price inelastic, for example in the case of an extreme necessity, the tax will be paid entirely by the buyer. If supply is perfectly inelastic, for example in the case of the momentary supply curve, the tax will be paid entirely by the seller.

Economics

You might also like to view...

A(n) ________ in U.S. interest rates will cause an increase in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate

A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease

Economics

The number of units of developing country currency required to purchase a basket of goods and services in a developing country that costs one dollar in the U.S. is given by

a. GNI price deflator. b. Human Development Index ranking. c. purchasing power parity. d. the exchange rate.

Economics

According to the Keynesian consumption function, if disposable income

a. increases, planned saving will increase. b. increases, planned consumption will increase. c. falls, planned saving will increase. d. increases, both planned saving and planned consumption will increase.

Economics

The essence of science is

a. the laboratory experiment. b. the scientific method. c. the study of nature, but not the study of society. d. All of the above are correct.

Economics