(Figure: Commodity Tax with Elastic Demand) According tothe figure, who bears the greater burden of a commodity tax?
Figure: Commodity Tax with Elastic Demand

Question

Quizplus · Accepted Answer

In the given figure, demand is relatively elastic which means that consumers are very sensitive to changes in price. With a commodity tax, the price of the good increases for the buyer, leading to a large decrease in the quantity demanded. Hence, the burden of the tax is mainly borne by the seller who experiences a larger decrease in equilibrium quantity than the buyer. This is shown by the larger shift in the supply curve compared to the demand curve. Therefore, choice B is the correct answer.

(Figure: Commodity Tax with Elastic Demand) According Tothe Figure, Who