If sellers bear 1/3 of the tax burden and elasticity of demand is 2, what is the elasticity of supply?
A) 4
B) 3
C) 2
D) 1

Question

Quizplus · Accepted Answer

The tax burden is shared between buyers and sellers based on the relative elasticities of demand and supply. If sellers bear 1/3 of the tax burden, buyers bear 2/3. The elasticity of demand is 2, so the elasticity of supply must be 4 to maintain this ratio (since 2/3 = 2/(2+4)).

If Sellers Bear 1/3 of the Tax Burden and Elasticity