If demand is extremely elastic, it is likely that _____ will bear most of the burden of a tax and that the deadweight loss will be relatively _____.
A) buyers; large
B) buyers; small
C) sellers; large
D) sellers; small

Question

Quizplus · Accepted Answer

When demand is extremely elastic, consumers are very sensitive to price changes and can easily switch to alternatives if the price of a good increases. Therefore, sellers will bear most of the burden of a tax because they cannot easily pass the tax onto consumers without losing a significant number of sales. The deadweight loss will be relatively large because the tax causes a significant reduction in the quantity traded, leading to a large loss in economic efficiency.

If Demand Is Extremely Elastic, It Is Likely That _____