Use the figure below to answer the following question(s).
Figure 4-8

Refer to Figure 4-8. Which of the following is true?
A) The tax increases the price of soft coal by $40 per ton.
B) Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax.
C) Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax.
D) Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal.

Question

Use the figure below to answer the following question(s).
Figure 4-8

Refer to Figure 4-8. Which of the following is true?
A) The tax increases the price of soft coal by $40 per ton. 
B) Since the demand for soft coal is more inelastic than the supply, consumers bear most of the burden of the tax. 
C) Since the demand for soft coal is more elastic than the supply, suppliers of soft coal bear most of the burden of the tax. 
D) Since the supply of soft coal is highly inelastic, the primary burden of the tax is imposed on the consumers of soft coal.

Quizplus · Accepted Answer

According to the figure, the supply curve is steeper (less elastic) than the demand curve. In this scenario, when a tax is imposed, the burden of the tax will be higher on the less elastic side of the market. Since the supply is less elastic than demand, suppliers of soft coal bear most of the burden of the tax. Therefore, option C is correct.

Use the Figure Below to Answer the Following Question(s)