When a tax is collected from the buyers in a market, ?
Correct answer: D. the tax burden on the buyers and sellers in the same as an equivalent tax collected from the sellers
- A. the tax burden falls most heavily on the buyers.
- B. the buyers bear the burden of the tax
- C. the sellers bear the burden of the tax
- D. the tax burden on the buyers and sellers in the same as an equivalent tax collected from the sellers
Explanation
Legal collection from buyers does not determine economic incidence, because the market price adjusts. A buyer-side tax has the same real burden as an equivalent seller-side tax, with the split determined by demand and supply elasticities.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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