If demand is inelastic, the tax incidence falls more heavily on the _____, and deadweight loss is relatively_____.
A) buyer; large
B) buyer; small
C) seller; large
D) seller; small

Question

Quizplus · Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so the tax incidence falls more heavily on the buyer, and because the quantity demanded doesn't change much, the deadweight loss is relatively small.

If Demand Is Inelastic, the Tax Incidence Falls More Heavily