If demand is more inelastic than supply is, the
A)larger the portion of the tax that will be paid by producers
B)larger the portion of the tax that will be paid by consumers
C)more likely it is that the tax will be spread equally between producers and consumers
D)smaller the portion of the tax that will be paid by consumers
E)smaller the impact that an income tax will have on consumer preferences

Question

Quizplus · Accepted Answer

When demand is more inelastic than supply, consumers are less responsive to changes in price compared to producers. Therefore, when a tax is imposed, producers are able to pass on a larger portion of the tax burden to consumers through higher prices. As a result, consumers end up paying a larger portion of the tax.

If Demand Is More Inelastic Than Supply Is, the