Consumers will bear a larger burden of an excise tax if
A) demand is relatively elastic and supply is relatively inelastic.
B) the tax is collected by firms rather than remitted directly to the government by consumers.
C) both demand and supply are relatively elastic.
D) both demand and supply are relatively inelastic.
E) demand is relatively inelastic and supply is relatively elastic.

Question

Quizplus · Accepted Answer

When demand is relatively inelastic and supply is relatively elastic, consumers are less responsive to price changes, so they bear a larger burden of the tax.

Consumers Will Bear a Larger Burden of an Excise Tax