Suppose that a market is initially in equilibrium,then a per-unit tax is imposed on sellers.The more elastic demand is,the ______ the burden of the tax borne by ______.
A) smaller;consumer and producers
B) larger;consumers
C) larger;producers
D) smaller;producers
E) larger;consumers and producers

Question

Quizplus · Accepted Answer

When a per-unit tax is imposed on sellers, the supply curve shifts upward by the amount of the tax. As a result, the price paid by consumers increases and the quantity sold decreases. The burden of the tax is shared by both producers and consumers, but the more elastic demand is, the more producers are able to shift the burden onto consumers by reducing the quantity sold. Therefore, the burden of the tax borne by producers decreases as demand becomes more elastic, and the burden borne by consumers increases. Thus, choice C is correct as it states that the burden of the tax borne by producers is larger when demand is more elastic.

Suppose That a Market Is Initially in Equilibrium,then a Per-Unit