The more price inelastic the demand for a good, the greater tends to be the incidence on consumers of a per-unit tax.

Question

Quizplus · Accepted Answer

If the demand for a good is inelastic, it means that consumers are not very responsive to changes in price. Therefore, if a per-unit tax is added to the price of the good, consumers are likely to continue purchasing the same amount of the good, but with a higher price. This means that they will bear a greater incidence of the tax, as opposed to the producer or seller. Hence, the statement is true.

The More Price Inelastic the Demand for a Good, the Greater