The burden of a tax per unit of output will fall heavily on consumers when demand is relatively ________ and supply is relatively ________.
A) inelastic; elastic
B) inelastic; inelastic
C) elastic; elastic
D) elastic; inelastic

Question

Quizplus · Accepted Answer

When demand is relatively inelastic, consumers are less responsive to changes in price, and therefore, the burden of the tax falls heavily on them. When supply is relatively elastic, producers are more responsive to changes in price, and therefore, they can pass on some of the burden of the tax to consumers by reducing the quantity supplied at the same price level.

The Burden of a Tax Per Unit of Output Will