In the Long Run,the Greater Burden of a Specific Tax

question 13

Multiple Choice

In the long run,the greater burden of a specific tax will usually be absorbed by

• A)consumers.
• B)the party consumers or producers with the more elastic demand/supply curve.
• C)the party with the least elastic demand/supply curve.
• D)shareholders and employees of the firm in the form of reduced dividends and wages.

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Definitions:

APC

In economics, it stands for Average Propensity to Consume, indicating the fraction of income that is spent.

Disposable Income

Resources households have at their disposal for saving and expenditure once income taxes have been accounted for.

Marginal Propensity

Typically refers to the marginal propensity to consume (MPC), which is the proportion of an additional income that a consumer spends on goods and services as opposed to saving it.

Disposable Income

The income available for saving and spending after the deduction of income taxes from earnings is known as disposable income.