A tax is levied on products A and B, both of which have the same price elasticity of supply. The demand for A is more inelastic than is the demand for B. Other things constant, how will this affect the incidence of an excise tax on these products?
A) Producers will bear a smaller share (and consumers a larger share) of the tax burden on A than B.
B) Consumers will bear a smaller share (and producers a larger share) of the tax burden on A than B.
C) The deadweight loss (or excess burden) will be larger for good A than B.
D) All of the above are true.
Correct Answer:
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