In general, the _______ elastic the demand for a product being taxed, the _______ the incidence of the tax will fall on the consumers.
A) more, more
B) more, less
C) less, less

Question

Quizplus · Accepted Answer

When the demand for a product is more elastic, consumers are more sensitive to changes in price and will likely reduce their consumption of the taxed product. Thus, the burden of the tax falls more on the producers, who may have to lower their prices to maintain their sales. On the other hand, when the demand for a product is less elastic, consumers are less likely to reduce their consumption of the taxed product, and producers can pass on more of the burden of the tax to consumers by increasing the price of the product.

In General, the _______ Elastic the Demand for a Product