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    Question

    The burden of a tax that is shifted forward to consumers

    through higher prices is known as:
    A Impact of taxation Correct Answer Incorrect Answer
    B Incidence of taxation Correct Answer Incorrect Answer
    C Tax avoidance Correct Answer Incorrect Answer
    D Tax evasion Correct Answer Incorrect Answer
    E Tax capitalization Correct Answer Incorrect Answer

    Solution

    Tax incidence refers to the final resting place of the tax burden, i.e., who ultimately bears the economic cost. It analyzes how the burden is distributed between buyers and sellers, depending on the relative price elasticities of demand and supply. The statutory incidence (who pays the government) may differ from the economic incidence.

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