Final answer:
When supply is less elastic than demand, the tax burden falls more heavily on sellers rather than consumers. Producers cannot easily adjust their output in response to price changes, and therefore they bear a greater share of the tax burden, whereas consumers bear a lower burden due to their flexibility in quantity demanded.
Step-by-step explanation:
When considering the effects of elasticity on tax burden, it's important to understand the concepts of inelastic demand and inelastic supply. If demand for a product is inelastic, it means consumers are less sensitive to price changes and will continue to buy the product even if the price increases. Conversely, if supply is inelastic, it implies that producers are less responsive to price changes; they cannot easily increase production if prices rise or decrease production if prices fall.
When supply is less elastic than demand, producers find it harder to change their production levels in response to price changes. Therefore, they cannot easily escape the burden of a tax by reducing their output. As a result, the tax burden falls more heavily on sellers, and they bear a higher share of the tax burden. In contrast, consumers, facing a more elastic demand, are more sensitive to price changes and can more easily reduce their quantity demanded when prices increase due to a tax. Hence, they bear a lower burden of the tax compared to when demand is inelastic.