Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,
A) buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves.
B) sellers will bear a larger share of the tax burden.
C) the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government.
D) buyers will bear a larger share of the tax burden.

Question

Quizplus · Accepted Answer

When demand is highly elastic and supply is highly inelastic, sellers bear a larger share of the tax burden because they cannot easily reduce the quantity supplied in response to the tax.

Suppose the Demand Curve for a Good Is Highly Elastic