Taxation and Income

• What is a progressive tax system?

  Average Tax rates increase as income increases
• What is a regressive tax system

  Average tax rates are falling as income increases
• What is a proportional tax system

  Average tax rates are the same regardless of income
• What is statutory incidence

  The party legally responsible for paying the tax
• What is economic incidence

  The party that actually ends up paying for the tax
• What is forward tax shifting?

  Transfer of tax burden from sellers to buyers through higher prices
• What is backward tax shifting

  Transfer of the tax burden from buyers to sellers through lower prices
• True/False: Businesses do not pay taxes, only people do

  True
• True/False: Economic incidence depends on the statutory incidence

  False
• What is the value of elasticity that is perfectly inelastic

  0
• What is the value of elasticity that is perfectly elastic

  Infinity
• True/False: The more elastic the demand/ supply, the greater the burden

  False
• What are economic profits

  The return to owners of a firm in excess of the opportunity costs of the factors used in production
• Which party bears the burden of the tax on land?

  Sellers