ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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high price elasticity of demand
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low price elasticity of demand
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totally inelastic price elasticity of demand
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unitary price elasticity of demand
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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: -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.
Detailed explanation-3: -The more elastic the supply curve, the easier it is for sellers to reduce the quantity sold instead of taking lower prices. In a market where both the demand and supply are very elastic, the imposition of an excise tax generates low revenue.
Detailed explanation-4: -If a tax is imposed on a market with inelastic demand and elastic supply: buyers will bear most of the burden of the tax.