Asked by Brittany Moncrief on May 27, 2024
Verified
Taxes levied on sellers and taxes levied on buyers are equivalent.
Taxes Levied
Charges imposed by governments on individuals or entities to fund government spending on public services and infrastructure.
- Grasp the essence of tax incidence and how the tax weight is distributed between buyers and sellers.
- Recognize the legislative aspect of tax imposition and its limitations in dictating the true tax burden.
Verified Answer
AA
ahmed al massMay 29, 2024
Final Answer :
True
Explanation :
Economically, taxes levied on sellers and taxes levied on buyers are equivalent because the burden of the tax is shared between buyers and sellers regardless of whom the tax is officially imposed on. This concept is known as tax incidence, which describes how the burden of a tax is distributed between buyers and sellers. The actual economic incidence of a tax does not depend on the legal incidence, meaning it does not matter whether the tax is levied on sellers or buyers; the market adjusts so that both parties end up sharing the tax burden through changes in the prices and quantities sold.
Learning Objectives
- Grasp the essence of tax incidence and how the tax weight is distributed between buyers and sellers.
- Recognize the legislative aspect of tax imposition and its limitations in dictating the true tax burden.