Suppose that a tax is placed on DVDs. If the sellers end up bearing most of the tax burden, this indicates that the
A) demand is more inelastic than supply.
B) supply is more inelastic than demand.
C) government has required that buyers remit the tax payments.
D) government has required that sellers remit the tax payments.

Question

Quizplus · Accepted Answer

If the sellers bear most of the tax burden, it indicates that the supply is more inelastic than demand. Inelastic supply means that the sellers are not able to adjust the quantity supplied easily in response to changes in price. Therefore, they end up absorbing most of the tax and passing on only a small portion of it to the buyers in the form of higher prices.

Suppose That a Tax Is Placed on DVDs