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9 February, 11:05

three-fourths of the burden, and sellers bear one-fourth of the burden. b. one-half of the burden, and sellers bear one-half of the burden. c. two-thirds of the burden, and sellers bear one-third of the burden. d. one-fourth of the burden, and sellers bear three-fourths of the burden.

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  1. 9 February, 13:55
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    The correct option is: For each unit of the good that is sold, buyers bear one-half of the tax burden and sellers bear one-half of the tax burden.

    Explanation:

    Incidence of tax is a term referred in economics which deals with division of taxes. Tax incidence refers to division of tax among the buyer and seller for a product. The tax incidence is related to the price elasticity of supply and demand.

    When a product is sold, the buyer of the product is charged with one-half of the tax burden and the seller of the product bears the other-half of the tax burden.

    The incidence of tax can be observed in two ways:

    i) Formal incidence

    ii) Effective incidence
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