If the producers bear a larger portion of tax incidence than the buyers,which of the following must be true?

Question

Quizplus · Accepted Answer

When producers bear a larger portion of tax incidence than buyers, it indicates that the supply curve is more inelastic than the demand curve. An inelastic supply curve means that a change in price has a relatively smaller effect on the quantity supplied compared to a change in demand. Therefore, producers are less responsive to changes in price, and the burden of the tax falls on them. This implies that choice B is correct, as it suggests that the producers' supply curve must be more inelastic than the buyers' demand curve. The other choices relate to different factors and are not necessarily true in this scenario.

If the Producers Bear a Larger Portion of Tax Incidence