Module 7 Microeconomics
Which of the following statements is correct concerning the burden of a tax imposed on take-out food?
Buyers and sellers share the burden of the tax.
Taxes
he amount of money the government requires from buyers or sellers on each unit bought or sold.
Tax Incidence
how the burden of a tax is shared among market participants.
When a tax is placed on the sellers of a good
supply for that good decreases.
Payroll tax
tax on the wages that firms pay their workers.
If a tax is levied on the sellers of flour, then
buyers and sellers will share the burden of the tax.
Where supply is more elastic than demand,
buyers bear most of the burden of the tax
When a tax is levied on buyers of tea,
buyers of tea and sellers of tea both are made worse off
In Singapore the government places a $5,000 tax on the buyers of new automobiles. After the purchase of a new car, a buyer must pay the government $5,000. How would the imposition of the tax on buyers be illustrated in a graph?
The tax will shift the demand curve down by $5,000
Ad Valorem Tax
based on a percentage of a good's price
When a tax is placed on the buyers of a good
demand for that good decreases
If a tax is levied on the buyers of a product, then there will be a(n)
downward shift of the demand curve
Excise Tax
is a tax on a specific good (such as gasoline, cigarettes, or alcohol) and is an example of a per-unit tax.
If demand is more elastic than supply,
it is easier for buyers than sellers to leave the market.
The tax burden always falls more heavily on the side of the market that is
less elastic
When a tax is placed on the sellers of a product, buyers pay
more, and sellers receive less than they did before the tax.
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect
most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
A tax imposed on the buyers of a good will raise the
price paid by buyers and lower equilibrium quantity
who actually pays a tax depends on
the price elasticities of supply and demand
Why do policy makers use taxes?
to raise revenue for public purposes and to influence market outcomes