{"id":91018,"date":"2025-06-01T10:44:14","date_gmt":"2025-06-01T10:44:14","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91018"},"modified":"2025-06-01T10:44:14","modified_gmt":"2025-06-01T10:44:14","slug":"consider-the-following-statements-1-burden-of-a-tax-on-a-commodit","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/","title":{"rendered":"Consider the following statements :\n  1. Burden of a tax on a commodit"},"content":{"rendered":"<p>Consider the following statements :<\/p>\n<ul>\n<li>1. Burden of a tax on a commodity is independent of who (buyer or seller) it is explicitly imposed upon<\/li>\n<li>2. Burden of a tax on a commodity depends on the slope of the demand and supply curves<\/li>\n<\/ul>\n<p>[amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;2 only&#8221; option3=&#8221;Both 1 and 2&#8243; option4=&#8221;Neither 1 nor 2&#8243; correct=&#8221;option3&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC CAPF &#8211; 2024<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-capf-2024.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-capf-2024\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nStatement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence.<br \/>\nStatement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves.<br \/>\nSince both statements are correct, option C is the correct answer.<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\nTax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nIf demand is perfectly inelastic (vertical demand curve), consumers bear the entire tax burden. If supply is perfectly inelastic (vertical supply curve), producers bear the entire tax burden. Conversely, if demand is perfectly elastic (horizontal demand curve), producers bear the entire burden. If supply is perfectly elastic (horizontal supply curve), consumers bear the entire burden.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Consider the following statements : 1. Burden of a tax on a commodity is independent of who (buyer or seller) it is explicitly imposed upon 2. Burden of a tax on a commodity depends on the slope of the demand and supply curves [amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;2 only&#8221; option3=&#8221;Both 1 and 2&#8243; option4=&#8221;Neither 1 nor &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Consider the following statements :\n  1. Burden of a tax on a commodit\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/#more-91018\">Detailed Solution<span class=\"screen-reader-text\">Consider the following statements :<br \/>\n  1. Burden of a tax on a commodit<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1085],"tags":[1103,1120,1196],"class_list":["post-91018","post","type-post","status-publish","format-standard","hentry","category-upsc-capf","tag-1103","tag-economic-development","tag-fiscal-policy-revenue","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Consider the following statements :  1. Burden of a tax on a commodit<\/title>\n<meta name=\"description\" content=\"Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence. Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves. Since both statements are correct, option C is the correct answer. Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Consider the following statements :  1. Burden of a tax on a commodit\" \/>\n<meta property=\"og:description\" content=\"Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence. Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves. Since both statements are correct, option C is the correct answer. Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T10:44:14+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Consider the following statements :  1. Burden of a tax on a commodit","description":"Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence. Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves. Since both statements are correct, option C is the correct answer. Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/","og_locale":"en_US","og_type":"article","og_title":"Consider the following statements :  1. Burden of a tax on a commodit","og_description":"Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence. Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves. Since both statements are correct, option C is the correct answer. Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T10:44:14+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/","url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/","name":"Consider the following statements : 1. Burden of a tax on a commodit","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T10:44:14+00:00","dateModified":"2025-06-01T10:44:14+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"Statement 1 is correct: The economic burden (incidence) of a tax, i.e., who ultimately pays the tax, is determined by the relative elasticities of demand and supply, not by whether the tax is legally imposed on the buyer or the seller. The statutory incidence is different from the economic incidence. Statement 2 is correct: The slope of the demand and supply curves reflects their elasticity. Steeper curves indicate lower elasticity, while flatter curves indicate higher elasticity. When demand is less elastic than supply, the buyer bears more of the tax burden. When supply is less elastic than demand, the seller bears more of the burden. Thus, the burden depends on the slopes (and therefore elasticities) of the curves. Since both statements are correct, option C is the correct answer. Tax incidence analysis in economics shows that the distribution of the tax burden between consumers and producers depends entirely on the price elasticity of demand and supply, not on who is legally required to pay the tax.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-burden-of-a-tax-on-a-commodit\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC CAPF","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-capf\/"},{"@type":"ListItem","position":3,"name":"Consider the following statements : 1. 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