Suppose the Environmental Protection Agency imposes an excise tax on polluting firms. In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Question

Quizplus · Accepted Answer

When demand is highly inelastic and supply is highly elastic, consumers are less sensitive to price changes and will continue to buy the product even at higher prices, while producers can easily adjust their production and pass the tax burden onto consumers.

Suppose the Environmental Protection Agency Imposes an Excise Tax on Polluting