Final answer:
The tax revenue for the government remains unchanged whether buyers or sellers are required to pay the tax. The ultimate economic incidence of the tax is determined by the relative elasticities of supply and demand, not by who is legally responsible for paying the tax.
Step-by-step explanation:
The imposition of a tax on either buyers or sellers does not affect the total tax revenue collected by the government, as long as the tax amount per unit remains the same. The key factor in determining the tax revenue is the quantity of goods sold (Qt) multiplied by the tax per unit. Whether buyers or sellers are legally required to pay the tax, the actual economic incidence, or burden, of the tax depends on the elasticity of supply and demand. A tax on buyers will increase the price they pay (Pc) from the initial equilibrium price (Pe), while a tax on sellers will reduce the price they receive (Pp) from the initial equilibrium price (Pe). However, both scenarios lead to the same equilibrium quantity and tax revenue if other conditions are constant.
The distribution of the tax burden among buyers and sellers, known as tax incidence, varies depending on the relative elasticity of supply and demand. If the demand is more elastic than the supply, the incidence of the tax falls more heavily on the sellers and vice versa. It is important to note that the total tax revenue to the government remains the same regardless of whom the tax is legally imposed on.