Question
The burden of a tax that is shifted forward to consumers
through higher prices is known as: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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A saree having cost price of Rs. 1500 is marked up by 50% above its cost price and sold after offering two successive discounts of 10% and 20% respectiv...
