Suppose that in a particular market,the demand curve is highly elastic and the supply curve is highly inelastic.If a tax is imposed in this market,then

Question

Quizplus · Accepted Answer

Since the demand curve is highly elastic, consumers are very sensitive to changes in price, which means they will be less likely to buy the taxed product and will instead switch to substitutes. On the other hand, since the supply curve is highly inelastic, producers will not be able to easily increase the quantity supplied to compensate for the tax, and will therefore have to bear a greater burden of the tax. This means that sellers will tend to pass on less of the tax to buyers, resulting in a greater burden on sellers than buyers.

Suppose That in a Particular Market,the Demand Curve Is Highly