Asked by Christina Silverio on Jul 09, 2024
Verified
Suppose a tax were imposed on motel rooms in the San Antonio area.If demand were slightly elastic and supply were very inelastic,the tax would be borne
A) entirely by motel owners
B) mainly by motel owners
C) mainly by motel renters
D) entirely by motel renters
Tax Burden
The total amount of taxes imposed on an individual, company, or economic sector by the government, often expressed as a percentage of income or GDP.
Slightly Elastic
Refers to a situation where a small change in price leads to a relatively small change in the quantity demanded or supplied.
Very Inelastic
Describes a situation where demand or supply hardly changes in response to changes in price.
- Analyze the effects of taxation on market outcomes including its impact on prices and quantities.
- Assess the conditions under which the onus of tax falls on buyers or sellers.
Verified Answer
YC
Yusmichel CanteroJul 10, 2024
Final Answer :
B
Explanation :
When demand is slightly elastic and supply is very inelastic, the burden of the tax falls mainly on the suppliers (motel owners in this case) because the suppliers are less able to pass the tax onto consumers due to their inelastic supply curve.
Learning Objectives
- Analyze the effects of taxation on market outcomes including its impact on prices and quantities.
- Assess the conditions under which the onus of tax falls on buyers or sellers.