When the demand for a good is relatively more elastic than its supply, _____.
A)the proportion of the tax on the good paid by the consumers is greater than that paid by the producers
B)the proportion of the tax on the good paid by the producers is greater than that paid by the consumers
C)government will impose a binding price ceiling
D)government will impose a binding price floor
E)government will impose a price ceiling that is not binding

Question

Quizplus · Accepted Answer

When the demand for a good is relatively more elastic than its supply, the burden of a tax on the good falls more heavily on the producers. This is because consumers are more responsive to price changes and can more easily reduce their quantity demanded, leaving producers to bear a larger share of the tax burden.

When the Demand for a Good Is Relatively More Elastic