Ans) When government imposes tax, it does not really matter upon whom tax is levied. Burden of tax falls upon both buyers and sellers. Now who will bear greater burden of tax depends upon the elasticity of demand and supply. Consequently, the less elastic side of the market bears greater burden of tax.
Tax = price paid by buyers after tax - price received by sellers after tax
Tax burden on buyers = price paid by buyers after tax - equilibrium price
Tax burden on sellers = equilibrium price - price received by sellers after tax.
Here, equilibrium price is $6
So, tax burden on buyers = $9 - $6 = $3
Tax burden on sellers = $6 - $3 = $3
Tax = $9 - $3 = $6
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