A 10 Percent Tax Is Levied on the Sale of Soft

Essay

A 10 percent tax is levied on the sale of soft drinks.This tax is collected from the sellers of the drinks.A critic of the tax argues that the sellers will shift the entire tax to the buyers and therefore be no worse off.Evaluate this argument by showing the market conditions that would have to prevail for the prediction to be correct.Indicate under what circumstances the tax will be shared by the buyers and the sellers of soft drinks.