ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic, Buyers of the good will bear most of the burden of the tax. More, and sellers receive less than they did before the tax.

Detailed explanation-2: -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-3: -A tax on a good raises the price buyers pay, lowers the price sellers receive, and reduces the quantity sold. 7. The burden of a tax is divided between buyers and sellers depending on the elasticity of demand and supply.

Detailed explanation-4: -If demand is perfectly inelastic, consumers always buy the same amount and therefore pay the entire burden of the tax. Sellers therefore get the same price they received before.