Use the figure A Tax on the Demand for a Good). If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true?

Figure: A Tax on the Demand for a Good

A) The size of area A is larger than the size of area B.
B) The size of area A is smaller than the size of area B.
C) Area A and area B are the same size.
D) The buyer of this good pays the entire tax incidence because it is being taxed.

Question

Use the figure A Tax on the Demand for a Good). If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true?
​
Figure: A Tax on the Demand for a Good

A) The size of area A is larger than the size of area B. 
B) The size of area A is smaller than the size of area B. 
C) Area A and area B are the same size. 
D) The buyer of this good pays the entire tax incidence because it is being taxed.

Quizplus · Accepted Answer

The Answer of Use the figure A Tax on the Demand for a Good). If we know that the price elasticity of demand is larger than the price elasticity of supply, what is true?
​
Figure: A Tax on the Demand for a Good

A) The size of area A is larger than the size of area B. 
B) The size of area A is smaller than the size of area B. 
C) Area A and area B are the same size. 
D) The buyer of this good pays the entire tax incidence because it is being taxed.

Use the Figure a Tax on the Demand for a Good)