The demand for salt is price inelastic and the supply of salt is price elastic.The demand for caviar is price elastic and the supply of caviar is price inelastic.Suppose that a tax of $1 per kilogram is levied on the sellers of salt and a tax of $1 per kilogram is levied on the buyers of caviar.Who would we expect to have to pay most of these taxes

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Quizplus · Accepted Answer

Because the demand for salt is price inelastic, even if the price of salt increases due to the tax, consumers will still purchase it. Therefore, the burden of the tax will fall on the buyers of salt. On the other hand, the supply of caviar is price inelastic, meaning that even if the price of caviar decreases, suppliers won't increase the supply significantly. Therefore, the burden of the tax will fall on the sellers of caviar.

The Demand for Salt Is Price Inelastic and the Supply