Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,the consumer's burden of the tax
A)is greater under the more elastic supply curve S0.
B)is greater under the less elastic supply curve S0.
C)is greater under the less elastic supply curve S1.
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question

Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,the consumer's burden of the tax
A)is greater under the more elastic supply curve S0. 
B)is greater under the less elastic supply curve S0. 
C)is greater under the less elastic supply curve S1. 
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Quizplus · Accepted Answer

Under the more elastic supply curve S0, suppliers have more flexibility to adjust their prices in response to the tax, thus shifting more of the burden onto consumers. In contrast, under the less elastic supply curve S1, suppliers have less flexibility to adjust their prices, thus absorbing more of the tax burden themselves. Therefore, the consumer's burden of the tax is greater under the more elastic supply curve S0.

Figure 18-2 Shows a Demand Curve and Two Sets of Supply