To determine who bears the greater share of a tax,we compare the
A) number of buyers to the number of sellers.
B) elasticity of supply to the elasticity of demand.
C) size of the tax to the price of the good.
D) government tax revenue to the revenue collected by the suppliers.
E) pre-tax quantity to the post-tax quantity.

Question

Quizplus · Accepted Answer

The elasticity of supply and demand determines who bears the greater share of a tax. If demand is more elastic than supply, then buyers will bear a smaller burden of the tax. If supply is more elastic than demand, then sellers will bear a smaller burden of the tax. Therefore, we compare the elasticity of supply to the elasticity of demand to determine who bears the greater share of the tax.

To Determine Who Bears the Greater Share of a Tax,we