Final answer:
When demand is less elastic than supply, consumers bear a higher tax burden because they are less responsive to price changes and will continue to buy the product despite higher prices resulting from the tax.
Step-by-step explanation:
When demand is less elastic than supply, it signifies that consumers are less responsive to changes in price compared to producers. In this scenario, if a tax is imposed on a good or service, the burden of the tax falls more heavily on consumers than on producers. This is because consumers are less likely to reduce their quantity demanded significantly in response to the higher price resulting from the tax. Conversely, with more elastic supply, producers can more easily change their production levels, thus avoiding some of the tax's impact.
For example, consider a higher tax on a product like cigarettes. If the demand for cigarettes is inelastic—meaning consumers are unlikely to reduce smoking significantly due to higher prices—then cigarette companies can pass most of the cost increase from the tax onto consumers through higher prices. This is how consumers end up bearing most of the tax burden when demand is inelastic relative to supply.