Final answer:
The burden of a tax on jet ski buyers depends on the elasticity of demand and supply. If demand is more inelastic, consumers bear most of the tax burden; if supply is more inelastic, sellers bear most of it. The tax incidence reveals which market side is more inelastic, where the burden will predominantly fall.
Step-by-step explanation:
When a tax is imposed on the buyers of jet skis, the division of the tax burden between the buyers and sellers depends on the elasticity of demand and supply for jet skis. If demand for jet skis is more inelastic than supply, meaning that consumers are not very responsive to changes in prices, then they will bear most of the tax burden. Conversely, if supply is more inelastic than demand, indicating that sellers cannot easily adjust production levels, then sellers will bear a larger share of the tax burden. Therefore, the burden of the tax on jet skis will either fall entirely on the buyers, be shared by the buyers and sellers, or fall entirely on the sellers, dependent on the relative inelasticities of demand and supply.
In examining tax incidence, it is crucial to assess which side of the market is more inelastic, as the tax burden falls on the most inelastic side. For example, cigarette taxes show that because demand is inelastic, the tax burden largely falls on consumers. This concept applies similarly to other goods including jet skis.