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Figure: Tax Incidence
-(Figure: Tax Incidence) Look at the figure Tax Incidence. All other things unchanged, when a good or service is characterized by a relatively elastic demand, as shown in panel _____, the greater share of the burden of an excise tax on it is borne by _____.

Question

Use the following to answer questions:
Figure: Tax Incidence 
-(Figure: Tax Incidence) Look at the figure Tax Incidence. All other things unchanged, when a good or service is characterized by a relatively elastic demand, as shown in panel _____, the greater share of the burden of an excise tax on it is borne by _____.

Quizplus · Accepted Answer

When demand is relatively elastic, sellers bear a greater share of the tax burden because buyers are more sensitive to price changes and will reduce their quantity demanded significantly if prices rise.

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