The burden of a tax will fall primarily on sellers when the
A) demand for the product is highly inelastic and the supply is relatively elastic.
B) demand for the product is highly elastic and the supply is relatively inelastic.
C) tax is legally (statutorily) imposed on the seller of the product.
D) tax is legally (statutorily) imposed on the buyer of the product.

Question

Quizplus · Accepted Answer

When demand is highly elastic and supply is relatively inelastic, sellers cannot pass the tax onto consumers because consumers will reduce their quantity demanded significantly. Thus, sellers bear more of the tax burden.

The Burden of a Tax Will Fall Primarily on Sellers