Use the following to answer question(s): Tax Incidence

-(Exhibit: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively inelastic supply, as shown in Panel _______ , the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel) is borne by _______ .
A) (a); buyers
B) (b); sellers
C) (a); sellers
D) (b); buyers

Question

Use the following to answer question(s): Tax Incidence
 
-(Exhibit: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively inelastic supply, as shown in Panel _______ , the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel) is borne by _______ .
A) (a); buyers 
B) (b); sellers 
C) (a); sellers 
D) (b); buyers

Quizplus · Accepted Answer

When supply is relatively inelastic, sellers cannot easily change the quantity supplied in response to price changes, so they bear a larger share of the tax burden.

Use the Following to Answer Question(s): Tax Incidence