Let the price elasticity of supply for a good be 1.8, and the absolute value of the price elasticity of demand be 1.8. Which of the following is TRUE in this case?
A) Producers carry the majority of the tax burden.
B) Consumers carry the majority of the tax burden.
C) Producers and consumers carry an equal amount of the tax burden.
D) Consumers carry the entire tax burden.

Question

Quizplus · Accepted Answer

When both price elasticities are equal and are greater than 1, the tax burden is equally distributed between producers and consumers. Therefore, in this case, option C is the correct answer.

Let the Price Elasticity of Supply for a Good Be