Suppose that a tax is placed on DVDs.If the sellers end up bearing most of the tax burden,we know that the

Question

Quizplus · Accepted Answer

If the sellers are bearing most of the tax burden, it means that they are unable to pass on the tax to the buyers in the form of a price increase. This implies that the supply of DVDs is relatively inelastic, meaning that the producers are unable to quickly adjust their output in response to changes in the market conditions. At the same time, the demand for DVDs is likely to be more elastic, as buyers are likely to be more responsive to changes in price. Therefore, the correct answer is B.

Suppose That a Tax Is Placed on DVDs