ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -If demand is more inelastic than supply, consumers bear most of the tax burden, and if supply is more inelastic than demand, sellers bear most of the tax burden. The intuition for this is simple.
Detailed explanation-2: -If demand is more inelastic than supply, consumers bear most of the tax burden. But, if supply is more inelastic than demand, sellers bear most of the tax burden.
Detailed explanation-3: -When demand is inelastic and supply is elastic, the burden of a tax falls mainly on producers. The incidence of a tax is determined by which group-buyers or sellers-must actually pay the government.
Detailed explanation-4: -Tax incidence can also be related to the price elasticity of supply and demand. When supply is more elastic than demand, the tax burden falls on the buyers. If demand is more elastic than supply, producers will bear the cost of the tax.
Detailed explanation-5: -the more inelastic are demand and supply, the greater is the deadweight loss of the tax. taxes levied on sellers and taxes levied on buyers are equivalent. when a good is taxed, the deadweight loss is larger the more elastic the demand and supply.