Suppose the demand curve for gasoline is more elastic than the supply curve for gasoline. If the government imposes a tax on gas stations (gasoline sellers), which party (buyers or sellers) will bear more of the tax burden? How will the tax burden change if the government imposed the tax on gasoline consumers, rather than sellers? explain in simple terms.
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explain in simple terms.
The tax incidence analysis consists of deciding who is the economic entity that bears the expense of tax increases. The incidence of taxes relies on the relative market elasticity of demand and supply. Buyers face more of the tax burden as supply is more elastic than demand. Producers face more of the tax costs as demand is more elastic than production.
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