Consumers with more elastic demand bear a smaller burden of a tax because they
A) have more buying power.
B) have less market power.
C) switch to other products when a tax is imposed.
D) have fewer substitutes for that good.
E) produce the taxed good themselves.

Question

Quizplus · Accepted Answer

Consumers with more elastic demand are more sensitive to changes in price and are likely to switch to other products when a tax is imposed. This means that the burden of the tax is spread out among a larger group of products, reducing the impact on any one particular good. This results in consumers with more elastic demand bearing a smaller burden of the tax.

Consumers with More Elastic Demand Bear a Smaller Burden of a Tax