Suppose that in a particular market,the demand curve is highly elastic,and the supply curve is highly inelastic.If a tax is imposed in this market,then the
A)buyers will bear a greater burden of the tax than the sellers.
B)sellers will bear a greater burden of the tax than the buyers.
C)buyers and sellers are likely to share the burden of the tax equally.
D)buyers and sellers will not share the burden equally,but it is impossible to determine who will bear the greater burden of the tax without more information.

Question

Quizplus · Accepted Answer

Since the demand is highly elastic, a tax would cause a significant decrease in quantity demanded. On the other hand, since the supply is highly inelastic, the quantity supplied will not change much in response to the tax. As a result, sellers will be able to pass on most of the burden of the tax to the buyers in the form of higher prices, and therefore, buyers will bear a greater burden of the tax than the sellers.

Suppose That in a Particular Market,the Demand Curve Is Highly