Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for whicha. the supply is more elastic than the demand. b. the demand in more elastic than the supply. c. the tax is placed on the sellers of the product. d. the tax is placed on the buyers of the product.

Question

Business

Ashly Ochoa

28 June, 17:46

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for whicha. the supply is more elastic than the demand. b. the demand in more elastic than the supply. c. the tax is placed on the sellers of the product. d. the tax is placed on the buyers of the product.

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Answers (1)

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Woodward · Answer 1

B. The demand is more elastic than supply.

Explanation:

Demand & supply are buyers & sellers ability, willingness to buy & sell respectively.

Elasticity means responsiveness of demand & supply to prices.

'Tax burden' can be forwarded / shared only in case of Indirect taxes, whose burden & incidence lie on different people.

The burden falls on the party (consumers / suppliers) whose market element (demand / supply) is inelastic i. e less responsive to prices.

So, if sellers are bearing larger burden : It means demand is relatively elastic & supply is relatively inelastic.