Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on toxic waste disposal. Who will pay the greater share of such a tax?
A) customers of toxic waste disposal companies
B) owners of toxic waste disposal companies
C) the government
D) All of them pay equally.

Question

Quizplus · Accepted Answer

When demand is very elastic, consumers are highly responsive to price changes. Therefore, if the government imposes a tax, the toxic waste disposal companies cannot easily pass this tax onto consumers without significantly reducing the quantity demanded. As a result, the owners of these companies will bear a greater share of the tax burden.

Suppose the Demand for Toxic Waste Disposal Is Very Elastic