Where a tax can be shifted the incidence depends on ?
Correct answer: C. elasticities of demand and supply
- A. whether there is perfect or imperfect information
- B. who is legally obliged to pay the tax
- C. elasticities of demand and supply
- D. how many producers there are:
Explanation
When a tax can be shifted, its economic burden depends mainly on the relative elasticities of demand and supply. The less elastic side has fewer alternatives and bears more of the tax.
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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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