On necessities, more of the incidence of tax is
A)borne by the producer.
B)borne by the consumer.
C)shared equally between the producer and the consumer.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

When a tax is imposed on necessities, it is likely that the demand for those goods will be inelastic, meaning that consumers are less responsive to price changes. As a result, producers will bear a smaller burden of the tax and pass on most of it to the consumers in the form of higher prices. Therefore, more of the incidence of tax is borne by the consumer.

On Necessities, More of the Incidence of Tax Is