For which of the following products would the burden of a tax likely fall more heavily on the sellers ?
Correct answer: D. entertainment
- A. Clothing
- B. food
- C. housing
- D. entertainment
Explanation
Tax incidence falls more heavily on the less elastic side of the market; entertainment is commonly treated as having relatively elastic demand and relatively inelastic supply, leaving more of the burden on sellers. This comparison depends on the assumed elasticities of the products.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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