The proportion of the tax burden that falls on consumers depends on:

Question

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The proportion of the tax burden that falls on consumers depends on both the price elasticity of demand and the price elasticity of supply. If demand is relatively inelastic (i.e. the quantity demanded does not change much in response to a change in price), consumers will bear a larger proportion of the tax burden because they are not very responsive to price changes. Similarly, if supply is relatively inelastic (i.e. the quantity supplied does not change much in response to a change in price), producers will bear a larger proportion of the tax burden because they cannot easily adjust their production in response to the tax. On the other hand, if demand or supply is relatively elastic (i.e. the quantity demanded or supplied changes significantly in response to a change in price), the burden of the tax will be shared more equally between consumers and producers.

The Proportion of the Tax Burden That Falls on Consumers