The more inelastic the demand for a product, the larger the share of the tax that will be paid by consumers.

Question

Quizplus · Accepted Answer

When demand is more inelastic, consumers are not as sensitive to changes in price, so they will continue to purchase the product even if the price increases due to taxes. Therefore, the burden of the tax will fall more heavily on consumers in the form of higher prices, and they will end up paying a larger share of the tax compared to producers.

The More Inelastic the Demand for a Product, the Larger