Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,
A)the larger is the decrease in quantity demanded as a result of the tax.
B)the smaller is the tax burden on buyers relative to the tax burden on sellers.
C)the larger is the deadweight loss of the tax.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When demand is more elastic, consumers are more responsive to price changes, leading to a larger decrease in quantity demanded (A). The tax burden shifts more to sellers as buyers are more sensitive to price changes (B). A more elastic demand also results in a larger deadweight loss because the reduction in quantity traded is greater (C). Therefore, all statements are correct.

Suppose a Tax of $1 Per Unit Is Imposed on a Good.The