If demand is relatively inelastic, and the supply curve is upward-sloping, then the burden of an excise tax is:
A)borne mostly by consumers.
B)borne mostly by producers.
C)shared by consumers and producers, with the burden falling mainly on consumers.
D)shared by consumers and producers, with the burden falling mainly on producers.

Question

Quizplus · Accepted Answer

When demand is relatively inelastic, consumers are less sensitive to price changes, meaning they will continue to buy the product even if the price rises. Therefore, in the case of an excise tax, the burden falls mostly on consumers because they are less likely to reduce their quantity demanded in response to the tax-induced price increase.

If Demand Is Relatively Inelastic, and the Supply Curve Is