If demand is more elastic, the portion of an excise tax borne by a buyer will
A)increase.
B)decrease.
C)be unchanged.
D)increase for normal goods, decrease for inferior goods.

Question

Quizplus · Accepted Answer

When demand is more elastic, the buyers are more sensitive to price changes. Thus, if an excise tax is imposed, the buyers will reduce their purchases significantly, leading to a decrease in the price paid by the buyers. In contrast, the sellers will end up bearing a larger portion of the tax burden, resulting in a higher price to the sellers.

If Demand Is More Elastic, the Portion of an Excise