The burden of a tax falls more heavily on the sellers in a market when ?
Correct answer: D. demand is elastic, and supply is inelastic
- A. both supply and demand are elastic
- B. both supply and demand are inelastic
- C. demand is inelastic and supply in elastic
- D. demand is elastic, and supply is inelastic
Explanation
Sellers bear more of a tax when supply is inelastic and demand is elastic, because sellers cannot easily reduce the quantity supplied while buyers can readily switch away. The tax therefore lowers the net price received by sellers more substantially.
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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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