Use the following to answer question:
-(Figure: Tax Incidence)Use Figure: Tax Incidence.All other things unchanged,when a good or service is characterized by a relatively elastic supply,as shown in panel _____,a greater share of the burden of an excise tax is borne by _____.

Question

Use the following to answer question: 
-(Figure: Tax Incidence)Use Figure: Tax Incidence.All other things unchanged,when a good or service is characterized by a relatively elastic supply,as shown in panel _____,a greater share of the burden of an excise tax is borne by _____.

Quizplus · Accepted Answer

In panel A, the supply is relatively elastic, which means that producers can easily adjust their production levels in response to changes in price. Therefore, when an excise tax is imposed, producers are able to pass on less of the tax burden to consumers in the form of higher prices, while bearing a greater share of the burden themselves. As a result, buyers will bear a smaller share of the tax burden.

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