A government wants to place a tax on a good, but it wants the burden of the tax to fall more heavily on the sellers of a good than on the buyers of a good. What should the government do to achieve this goal?
A) Tax only sellers.
B) Tax goods with price elasticities of supply that are smaller than elasticities of demand.
C) Tax goods with price elasticities of demand that are smaller than elasticities of supply.
D) Tax only buyers.

Question

Quizplus · Accepted Answer

When the supply is less elastic than demand, sellers are less able to adjust their quantity supplied in response to the tax, leading to a greater burden of the tax falling on them.

A Government Wants to Place a Tax on a Good