Question

QUESTION 60 Figure 6-30 Panela) Panel (b) 2 Panel (c) Refer to Figure 6-30. In which market will the tax burden be most equally divided between buyers and sellers? a. the market shown in panel (a). Ob the market shown in panel (b). O c the market shown in panel (c). O d. All of the above are correct. Click Save and Sub

Answer 1

Here in the given question when tax will be equally divided between buyers and seller then the condition will be equilibrium and deadweight loss to the society will be zero

It basically depends on the the relative price elasticity of demand and supply between buyers and the sellers

For example if supply is more elastic as compared to demand then the most of the tax burden will fall on the buyers and vice versa

Among the given figures it is clearly represented by the panel c

In panel B the demand is inelastic in nature which means the burden will mostly falls on buyers and in panel a since the the supply is is inelastic so burden will fall on suppliers

The correct answer is option C