Question

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product. b. tax is placed on the buyers of the product. c. supply of the product is more elastic than the demand for the product. d. demand for the product is more elastic than the supply of the product.

Answer 1

The correct answer is the letter d. Demand for the product is more elastic than the supply of the product.

Step-by-step explanation:

Demand elasticity measures the change in quantity demanded due to changes in prices. Supply elasticity, on the other hand, measures the change in quantity supplied due to changes in prices. Thus, the sellers of a product will bear a higher tax burden if the demand for the product is more sensitive than the supply, that is, changes in prices have a greater impact on demand and, to a lesser extent, supply.