The tax burden generally falls on to the side of the market that is relatively more elastic.

Question

Quizplus · Accepted Answer

The tax burden generally falls on to the side of the market that is relatively less elastic, because when the demand or supply is more elastic (responsive to changes in price), the producer or the consumer can more easily adjust to the tax by either reducing production or consumption. However, when the demand or supply is less elastic (inelastic), the producer or the consumer cannot easily adjust to the tax, and the burden of the tax falls more heavily on them.

The Tax Burden Generally Falls on to the Side of the Market