In which of the above market situations will the largest portion of an excise tax of a specified amount per unit of output be borne by buyers?

Question

Quizplus · Accepted Answer

In market situation 1, the supply and demand curves are perfectly elastic, meaning that both buyers and sellers have a high degree of bargaining power and are able to easily shift the burden of the tax onto each other. In market situation 2, the demand curve is perfectly inelastic, meaning that buyers cannot easily adjust their consumption in response to the tax and will bear the full burden of the tax themselves. In market situation 3, the supply curve is perfectly inelastic, meaning that sellers cannot easily adjust their production in response to the tax and will pass the full burden of the tax onto buyers. In market situation 4, the demand curve is more elastic than the supply curve, meaning that buyers have more bargaining power and will bear a larger portion of the tax burden than sellers. Therefore, the largest portion of an excise tax per unit of output will be borne by buyers in market situation 4.

In Which of the Above Market Situations Will the Largest