The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. 2. What determines how the tax burden is shared between buyers and sellers?
The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. 2. What determines how the tax burden is shared between buyers and sellers?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf.
2. What determines how the tax burden is shared between buyers and sellers?
Expert Solution
Step 1
Tax is a source of revenue for government. Imposition of tax leads to decrease in both demand and supply of goods as sellers receive lower price after tax and buyers have to pay a higher price for the good after tax.
Imposition of tax leads to leftward shift in demand or supply curve depending on whom tax is imposed.
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