Producers will bear a larger burden of a sales tax if
A)demand is relatively elastic and supply is relatively inelastic.
B)demand is relatively inelastic and supply is relatively elastic.
C)both demand and supply are relatively inelastic.
D)both demand and supply are relatively elastic.
E)the tax is collected by firms rather than remitted directly to the government by consumers.

Question

Quizplus · Accepted Answer

When demand is relatively elastic and supply is relatively inelastic, producers have less flexibility to change their prices and pass on the tax to consumers. As a result, they end up bearing a larger burden of the tax themselves.

Producers Will Bear a Larger Burden of a Sales Tax