If supply is more inelastic than demand is, the
A)more the tax will fall on producers
B)more the tax will fall on consumers
C)less likely that a tax will have an impact on market transactions
D)less likely it a tax will lead to tax avoidance
E)greater the impact that a tax has on consumer expectations

Question

Quizplus · Accepted Answer

When supply is more inelastic than demand, producers will have a harder time adjusting their production levels in response to a tax. This means that they will bear a larger portion of the burden of the tax, as they are unable to shift the cost onto consumers through higher prices. Thus, the more inelastic the supply, the more the tax will fall on producers.

If Supply Is More Inelastic Than Demand Is, the