If a tax is imposed on a market with inelastic demand and elastic supply:
A) buyers will bear most of the burden of the tax.
B) sellers will bear most of the burden of the tax.
C) the burden of the tax will be shared equally between buyers and sellers.
D) neither the buyer nor the seller will bear the burden of the tax.

Question

Quizplus · Accepted Answer

In a market with inelastic demand, buyers are not very responsive to changes in price, meaning they will continue to buy the good even if the price goes up due to the tax. In contrast, with elastic supply, sellers are more responsive to changes in price, so they will be more likely to absorb some of the tax in the form of lower prices. However, since demand is relatively unresponsive, the majority of the burden of the tax will fall on buyers, making choice A the best answer.

If a Tax Is Imposed on a Market with Inelastic