Question

Compared to consumers, producers will lose the lesser amount of surplus from a tax if:

Answer 1

Answer: Supply is more elastic than demand

Step-by-step explanation:

Elastic demand means if there is an increase in price then the quantity demanded will decrease. Percentage change in price results in a percentage change in quantity.

If supply is more elastic then that would mean the producers are getting affected. Because a change in price would affect the quantity demanded and hence would affect the supply of the product. Taxes would mean the producers would have to increase the price of the product hence, affected producer surplus and decreasing the demand of the product.