Answer to Question #168283 in Microeconomics for Chhavi Nagar

Question

"If the government wants to minimize the tax burden of any indirect tax on consumers,then it is necessary that the government impose this tax on producers rather than consumers".Is this statement true or false?Justify and logically analyze your argument.Draw graphs if necessary

Answer 1

Indirect tax imposed on goods and services increase the buying price for consumers.

Tax burden affects both producers and consumers.

Elasticity of demand and supply helps to show which group bears most of the burden. Consumers bear more tax burden when the demand is higher than the supply. Producers bear more tax burden when supply is higher than demand.