Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the
i) supply is more elastic than the demand.
Ii) demand in more elastic than the supply.
Iii) tax is placed on the sellers of the product.
Iv) tax is placed on the buyers of the product.

Question

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the 
i) supply is more elastic than the demand.
Ii) demand in more elastic than the supply.
Iii) tax is placed on the sellers of the product.
Iv) tax is placed on the buyers of the product.

Quizplus · Accepted Answer

When demand is more elastic than supply, the burden of the tax falls more heavily on the sellers. This is because when a tax is imposed, sellers are not able to pass on the entire burden of the tax to buyers in the form of higher prices because buyers will reduce their purchases due to the elasticity of demand. So, the sellers end up bearing a larger share of the tax burden.

Sellers of a Good Bear the Larger Share of the Tax