The more elastic side of the market can escape more of the tax burden.

Question

Quizplus · Accepted Answer

When a tax is imposed on a market, the more elastic side (i.e., the side that can more easily adjust their behavior in response to price changes) can shift more of the tax burden onto the less elastic side of the market. This is because the more elastic side can adjust their behavior to avoid the tax (e.g., by buying a substitute or reducing their quantity demanded), while the less elastic side has fewer options and is more likely to bear the burden of the tax. Therefore, the statement is true.

The More Elastic Side of the Market Can Escape More