Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be

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Quizplus · Accepted Answer

When demand is highly inelastic and supply is highly elastic, the burden of the tax falls mainly on the buyers. This is because, in this scenario, the buyers' demand for the product is relatively unaffected by the price increase caused by the tax, while the suppliers face a more significant impact on their profits due to the decrease in the quantity demanded. Therefore, the suppliers are likely to lower the price to some extent to maintain their sales, and the buyers will ultimately bear most of the burden of the excise tax.

Assume the Demand for Automobile Tires Is Highly Inelastic and That