The change in a product's price when a per-unit tax is assessed on producers is greatest when
A)demand is very flat (elastic) and supply is very steep (inelastic).
B)both demand and supply are very steep (inelastic).
C)both demand and supply are very flat (elastic).
D)supply is perfectly inelastic.
E)demand is very steep (inelastic) and supply is very flat (elastic).

Question

Quizplus · Accepted Answer

When demand is inelastic and supply is elastic, producers can pass most of the tax onto consumers, leading to a larger change in price.

The Change in a Product's Price When a Per-Unit Tax