Consumers will bear a larger burden of an excise tax if
A)both demand and supply are relatively inelastic.
B)the tax is collected by firms rather than remitted directly to the government by consumers.
C)both demand and supply are relatively elastic.
D)demand is relatively elastic and supply is relatively inelastic.
E)demand is relatively inelastic and supply is relatively elastic.

Question

Quizplus · Accepted Answer

Consumers bear a larger burden of an excise tax when demand is relatively inelastic and supply is relatively elastic because consumers are less responsive to price changes, so they will continue to buy the product despite the tax-induced price increase.

Consumers Will Bear a Larger Burden of an Excise Tax