When the price elasticity of supply is _____ relative to the price elasticity of demand, then sellers bear _____ of the economic burden of a tax.
A)small; all
B)small; none
C)large; a bigger share
D)large; a smaller share

Question

Quizplus · Accepted Answer

When the price elasticity of supply is larger relative to the price elasticity of demand, sellers are more responsive to changes in price compared to buyers. This means that when a tax is imposed on the good, sellers can more easily pass on the burden of the tax to buyers by raising the price, as buyers are less likely to decrease their quantity demanded as a response to the price increase. Therefore, sellers bear a smaller share of the economic burden of the tax.

When the Price Elasticity of Supply Is _____ Relative to the Price