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 demand, 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) (c); buyers
B) (c); sellers
C) (d); sellers
D) (d); 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 demand, 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) (c); buyers 
B) (c); sellers 
C) (d); sellers 
D) (d); buyers

Quizplus · Accepted Answer

When demand is relatively inelastic, consumers are less sensitive to price changes, meaning they will continue to buy the product even if the price rises due to a tax. Therefore, the greater share of the tax burden falls on the buyers, as they are less likely to reduce their quantity demanded significantly in response to the price increase.

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