The more price elastic is demand, the larger the portion of a tax that is paid by sellers

Question

Quizplus · Accepted Answer

When demand is price elastic, consumers are more sensitive to changes in price, which means they will reduce their quantity demanded more when faced with a tax increase. This shifts more of the burden of the tax onto the sellers, who will have to lower their prices to stay competitive and maintain sales levels. Therefore, a larger portion of the tax will be paid by the sellers.

The More Price Elastic Is Demand, the Larger the Portion