Which term describes how the tax burden is distributed between consumers and producers?

• A. Tax Incidence
• B. Tax Equity
• C. Regulation
• D. Common Resource

Answer: (A)

Tax incidence explains how the burden of a tax is shared between buyers and sellers. When a tax is levied on sellers, the supply curve shifts up, pushing the price paid by consumers higher and the amount received by producers lower. Which side ends up carrying most of the load depends on the relative price responsiveness (elasticity) of demand and supply: if buyers are not very responsive to price changes (inelastic demand), they bear most of the tax; if sellers are not very responsive (inelastic supply), producers bear more. The core idea is that the economic burden is determined by elasticities, not by who is legally obligated to pay the tax. Other terms like tax equity, regulation, or common resource describe fairness, rules, or resource types, not how the tax burden is allocated.