In the market for Good X-a necessity good without any good substitutes-the workers and capital in the industry can easily find work producing other goods. The burden of the tax is likely to fall:
A) more heavily on buyers, given that demand is more inelastic than supply.
B) evenly between buyers and sellers.
C) more heavily on sellers, given that supply is more inelastic than demand.
D) more heavily on buyers, given that demand is more elastic than supply.

Question

Quizplus · Accepted Answer

The burden of a tax falls more heavily on the side of the market that is less elastic. Since Good X is a necessity with inelastic demand and the supply is more elastic (workers and capital can easily find work elsewhere), the tax burden falls more heavily on buyers.

In the Market for Good X-A Necessity Good Without Any