Question

Both buyers and sellers of a good are responsive to changes in the price of the product. An increase in the sales tax on the product will be paid by Select the correct answer below:

A. both buyers and sellers in exactly equal amounts.
B. mostly the buyers.
C. mostly the sellers.
D. both buyers and sellers, in similar amounts

Answer 1

D. both buyers and sellers, in similar amounts.

Step-by-step explanation:

Sales tax is defined as the tax that is paid to a government for the sale of certain amount of goods and services. The seller's charge the taxes to the buyer and remits it to the government.

The proportion of who bears tax burden is determined by elasticity of demand, when there is inelastic demand such as in purchase of cigerates the tax burden can be pushed to the buyers by sellers.

When the demand is elastic or there are substitutes, the tax burden is more on the seller's. They cannot push tax burden to buyers because demand will drop.