Tax burdens are higher on consumers when
A) supply and demand are elastic.
B) demand and supply are inelastic.
C) demand is elastic and supply is inelastic.
D) demand is inelastic and supply is elastic.

Question

Quizplus · Accepted Answer

When demand is inelastic and supply is elastic, consumers are less sensitive to price changes and will bear a larger portion of the tax burden, as they are less likely to reduce their quantity demanded in response to the tax-induced price increase. Conversely, suppliers can more easily adjust their quantity supplied due to their elasticity, shifting less of the tax burden onto themselves.

Tax Burdens Are Higher on Consumers When