Answer to Question #317421 in Microeconomics for gagan

Question

what determines how the burden of tax is divided between buyers and sellers ? why?

Answer 1

The division of burden of tax between buyers and sellers is determined by the elasticity of demand and supply. An increase in tax on a specific good directly affects buyers willingness and ability to purchase, which may result in buyers looking for alternatives. When the demand for goods decrease, the seller bears the greater burden of tax.