When a tax can be transferred, what determines the tax burden distribution?

Multiple choice question for Market. Select an option, then review the explanation below.

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The level of information accuracy availableThe responsiveness of supply and demand to price changesThe total number of suppliers in the marketThe party legally responsible for remitting the taxThe duration for which the tax is imposed

Explanation

The allocation of tax burden, or tax incidence, is influenced primarily by the price elasticities of demand and supply. This determines how much of the tax can be passed on to consumers versus absorbed by producers, regardless of who is legally required to pay the tax.

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When a tax can be transferred, what determines the tax burden distribution?

Explanation

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