Suppose the government levies a $4 per month excise tax on cable TV.If the demand for cable TV is relatively (but not perfectly)inelastic and the supply curve is relatively (but not perfectly)elastic,then the price of cable TV will:

Question

Quizplus · Accepted Answer

When demand is relatively inelastic and supply is relatively elastic, the burden of an excise tax falls more heavily on consumers than on producers. This means the price consumers pay will increase, but by less than the amount of the tax, as producers can more easily adjust their quantity supplied and absorb some of the tax burden.

Suppose the Government Levies a $4 Per Month Excise Tax