Th1.2: The Incidence of Tax

Question 1

What is the incidence of tax?

Answer 1

the tax burden on the taxpayer

Question 2

When does the supplier pay all the tax?

Answer 2

when demand curve is perfectly elastic

when supply curve is perfectly inelastic

Question 3

When will all the tax be passed on to the consumer?

Answer 3

when demand curve is perfectly inelastic

when supply curve is perfectly elastic

Question 4

In general, the more elastic the demand curve…

Answer 4

the lower the incidence of tax on consumers

Question 5

In general, the more inelastic the supply curve…

Answer 5

the lower the incidence of tax on consumers

Question 6

Why is it that the more inelastic the demand curve, the higher revenue of tax for the government?

Answer 6

quantity demanded falls less and the more goods that are bought, the higher the tax revenue