When a per-unit tax is imposed on a market, the side of the market that is less price elastic generally bears:
Correct answer: B. A larger share of the tax
- A. A smaller share of the tax
- B. A larger share of the tax
- C. No share of the tax
- D. The entire tax by definition
Explanation
The less elastic side has fewer practical alternatives and therefore is less able to change its quantity. It bears the larger share of the tax burden, regardless of whether the tax is legally charged to buyers or sellers.
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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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