The excess burden of taxation can be minimized by _____.
A)placing taxes on goods with elastic demand schedules
B)placing taxes on goods with inelastic demand schedules
C)placing taxes on goods with elastic supply schedules
D)placing taxes on goods with inelastic supply schedule
E)b and d

Question

Quizplus · Accepted Answer

The excess burden of taxation can be minimized by placing taxes on goods with inelastic demand schedules (choice B) and on goods with inelastic supply schedules (choice D). When taxes are placed on goods with inelastic demand, consumers are less responsive to price changes, and so the tax does not significantly reduce the quantity demanded. Similarly, when taxes are placed on goods with inelastic supply, suppliers are less responsive to price changes, and so the tax does not significantly reduce the quantity supplied. By minimizing the quantity changes, the excess burden of taxation is reduced.

The Excess Burden of Taxation Can Be Minimized by _____