Final answer:
The main determinants of the excess burden of a tax are the elasticities of demand and supply. Inelastic demand leads to consumers bearing most of the tax burden, while inelastic supply shifts the burden to producers.
Step-by-step explanation:
What are the main determinants of the excess burden of a tax? The main determinant is the concept of elasticity in economics. Elasticity measures how demand or supply responds to changes in price. When discussing taxes, if demand is more inelastic than supply, meaning that consumers are less responsive to price changes, consumers will bear most of the tax burden. Conversely, if supply is more inelastic, producers will shoulder more of the cost. In the case of tobacco, because demand is inelastic, the tax incidence or burden falls predominantly on the consumers.
The main determinants of the excess burden or deadweight loss of a tax are the elasticity of demand and supply. If the demand is more inelastic than supply, consumers bear most of the tax burden because they are less responsive to changes in price. On the other hand, if supply is more inelastic than demand, sellers bear most of the tax burden as they have less flexibility to adjust their production.