Use the figure below to answer the following question(s).
Figure 4-7
-Refer to Figure 4-7. Which of the following is true for the tax illustrated?
A) The tax increases the price of gasoline by $.60.
B) Since the demand for gasoline is more inelastic than the supply, consumers bear most of the burden of the tax.
C) Since the demand for gasoline is more elastic than the supply, consumers bear most of the burden of the tax.
D) Since the supply of gasoline is highly inelastic, the primary burden of the tax is imposed on the suppliers of gasoline.

Question

Use the figure below to answer the following question(s).
Figure 4-7 
-Refer to Figure 4-7. Which of the following is true for the tax illustrated?
A) The tax increases the price of gasoline by $.60. 
B) Since the demand for gasoline is more inelastic than the supply, consumers bear most of the burden of the tax. 
C) Since the demand for gasoline is more elastic than the supply, consumers bear most of the burden of the tax. 
D) Since the supply of gasoline is highly inelastic, the primary burden of the tax is imposed on the suppliers of gasoline.

Quizplus · Accepted Answer

When demand is more inelastic than supply, consumers bear a larger share of the tax burden because they are less responsive to price changes.

Use the Figure Below to Answer the Following Question(s)