Question

A tax:________.

a. lowers the price buyers pay and raises the price sellers receive.
b. raises the price buyers pay and lowers the price sellers receive.
c. places a wedge between the price buyers pay and the price sellers receive.
d. Both b) and c) are correct.

Answer 1

Option B,raises the price buyers pay and lowers the price sellers receive, is correct

Step-by-step explanation:

Tax levied on a product makes the commodity expensive as consumers would to have to pay more to own the product and inversely reduces the revenue of the seller as a portion of the amount received would be sent to tax authority as being tax received on their behalf on goods bought by the consumers.

Option A is wrong as is the opposite of true position because tax does not in anyway lower the price paid by buyer and does not increase the revenue of the seller.

Answer 2

B) raises the price buyers pay and lowers the price sellers receive.

Step-by-step explanation:

A tax can be defined as the compulsory levy by the government on the income of an individual or company and the goods and services. It is used to generate income in a country in order to finance the expenditures of the government.

Types of tax

• Income Tax: This is the compulsory levy by the government on the income of an individual.

•Corporate Tax: This is the levy paid by corporate organzation on their Profits.

•Sales Tax: It is levied on goods and services. This type of tax increases the price of a product thereby making buyers to pay more. The sellers receives lower prices because they will deduct tax from what the sellers have paid and pay to the government.

•Property Tax: It is levied on the value of land or property.

•Tariff: Tax paid on imported goods. It is used to discourage importation. An increase in import tariff leads to an increase in price of the Commodity thereby leading to decrease in quantity purchased.

There are three basic tax laws

1) Progressive tax

2) Regressive tax

3) Proportional tax.