Final answer:
The tax status of a negative current E P distribution is determined by the elasticity of demand and supply, influencing who bears most of the tax burden, either consumers or sellers.
Step-by-step explanation:
When current E P is negative, the tax status of a distribution is primarily determined by the elasticity of demand and supply. Elasticity measures how much the quantity demanded or supplied responds to changes in price, including taxes. In business and economics, understanding the concept of tax incidence is crucial because it helps determine who bears the cost of a tax. If demand is more inelastic than supply, meaning consumers do not significantly change their purchasing behavior when the price increases due to a tax, then consumers bear most of the tax burden. Conversely, if supply is more inelastic than demand, indicating that sellers cannot easily change the quantity they produce in response to a price change caused by a tax, then sellers bear most of the tax burden. This concept is essential in public policy and business, as it affects pricing strategies, market analysis, and financial outcomes for both consumers and producers.