For Uber rides, which have a highly elastic supply and a downward-sloping demand curve:
A)producers will bear most of the burden of a tax.
B)producers will bear only a small proportion of the burden of a tax.
C)consumers and producers will split the burden of a tax in half.
D)consumers will not bear any of the burden of a tax.

Question

Quizplus · Accepted Answer

In a highly elastic supply and downward-sloping demand curve market, such as Uber rides, producers can easily adjust their supply in response to changes in demand. Therefore, if a tax is imposed on the producers, they can simply decrease their supply to avoid paying the tax. This means that consumers will end up paying a higher price for the service, and the burden of the tax will fall on them, not on the producers. Hence, producers will bear only a small proportion of the burden of a tax.

For Uber Rides, Which Have a Highly Elastic Supply and a Downward-Sloping