Commodity Taxes

Question 1

commodity tax

Answer 1

tax on goods

1. who pays does not depend on who writes the check to the government
2. who pays does depend on relative elasticities of demand and supply
3. raises revenue and creates lost gains from trade - dead weight loss

Question 2

tax on suppliers

Answer 2

increases cost for buyers and sellers receive less than before

Question 3

tax on buyers

Answer 3

reduces their willingness to pay and demand curve shifts down. buyers pay more than before and sellers receive less than before

Question 4

the more elastic side of the market will pay

Answer 4

a smaller share of a tax

Question 5

less elastic - more inelastic will pay

Answer 5

a greater share of a tax

Question 6

when demand is more elastic than supply

Answer 6

demanders pay a smaller share of tax and sellers pay a larger share of the tax