Suppose that price elasticity of demand is relatively inelastic for good X.If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X,who will bear the greater burden of the tax?

Question

Quizplus · Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so they will bear a greater burden of the tax. Since supply is elastic, producers can more easily adjust their quantity supplied, passing more of the tax burden onto consumers.

Suppose That Price Elasticity of Demand Is Relatively Inelastic for Good