159k views
4 votes
If the legal incidence of a tax falls entirely on suppliers, what is the expected economic effect on demanders?

A) No economic effect on demanders
B) Increased demand for the product
C) Decreased demand for the product
D) Uncertain impact on demanders

1 Answer

7 votes

Final answer:

If the legal incidence of a tax falls entirely on suppliers, the expected economic effect on demanders is decreased demand for the product.

Step-by-step explanation:

If the legal incidence of a tax falls entirely on suppliers, it means that the suppliers are responsible for paying the tax. In this case, the expected economic effect on demanders is decreased demand for the product.

When suppliers have to bear the burden of the tax, they may pass on the cost to the demanders in the form of higher prices, leading to a decrease in demand.

User Murray Rowan
by
8.7k points