Identify whether the following statements about the economic

Identify whether the following statements about the economics of taxes are true or false by dragging and dropping the relevant word into the bins provided. Tax incidence is determined by which group (buyers or sellers) must write the check to the government. When the price elasticity of demand is low and the price elasticity of supply is high, the burden of a tax falls mainly on producers. The effect of a tax on the equilibrium price is the same regardless of who the tax is levied upon. When the price elasticity of demand is high and the price elasticity of supply is low, the burden of a tax falls mainly on consumers. A tax can distort incentives and create missed opportunities for mutually beneficial transactions.

Solution

(1) True.

Tax incidence is how buyers and sellers share the tax burden among themselves.

(2) False

When demand is inelastic and supply is elastic, tax burden is borne mostly by buyers.

(3) True

No matter which side is taxed, effect on equilibrium is same.

(4) False

When demand is elastic and supply is inelastic, burden of tax mainly falls on producer.

(5) True

Since tax creates distortion, it results in net welfare loss for the society.