When a good is taxed, the burden of the tax:

a. falls more heavily on the side of the market that is more elastic.

b. falls more heavily on the side of the market that is more inelastic.

c. falls more heavily on the side of the market that is closer to unit elastic.

d. is distributed independently of relative elasticities of supply and demand

Question

Business

Big Mac

8 March, 02:15

When a good is taxed, the burden of the tax:

a. falls more heavily on the side of the market that is more elastic.

b. falls more heavily on the side of the market that is more inelastic.

c. falls more heavily on the side of the market that is closer to unit elastic.

d. is distributed independently of relative elasticities of supply and demand

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Answers (1)

Know the Answer?

Gideon Cox · Answer 1

The answer is B.

Explanation:

For a demand to be elastic, the demand must be sensitive to price. This means that an increase in price will lead to a substantial decrease in demand.

For a demand to be inelastic, the demand must be insensitive to price. This means that an increase in price will lead to a negligible (little change or no change) decrease in demand. Example of the goods here is good considered as necessity.

When a good is taxed, the burden of the tax falls more heavily on the side of the market that is more inelastic because this people don't have choice than to buy the product. The product here is usually a necessity. The burden comes in the form of an increase in price.