Asked by Amanda Sammons on Jun 30, 2024
Verified
Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the
A) buyers will bear a greater burden of the tax than the sellers.
B) sellers will bear a greater burden of the tax than the buyers.
C) buyers and sellers are likely to share the burden of the tax equally.
D) buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.
Elastic
A term used to describe a situation where the demand or supply of a good or service is sensitive to changes in price.
Inelastic
A characteristic of goods or services for which demand or supply does not significantly change in response to price changes.
- Understand the principles of tax incidence in different market scenarios.
- Identify the factors influencing the burden distribution of taxes between buyers and sellers.
Verified Answer
SA
Sarosha AzizaliJul 03, 2024
Final Answer :
A
Explanation :
When the supply curve is highly elastic and the demand curve is highly inelastic, buyers will bear a greater burden of the tax than the sellers. This is because inelastic demand indicates that buyers are less responsive to price changes, while elastic supply suggests sellers can more easily adjust their quantity supplied in response to price changes, including tax-induced price changes.
Learning Objectives
- Understand the principles of tax incidence in different market scenarios.
- Identify the factors influencing the burden distribution of taxes between buyers and sellers.