Question

Buyer of a good bear the larger share of the tax burden when a tax is placed on a product for whicha. the supply is more elastic than the demand.b. the demand in more elastic than the supply.c. the tax is placed on the sellers of the product.d. the tax is placed on the buyers of the product

Answer 1

Answer: A. The supply is more elastic than the demand

Explanation: When the supply of a product is more elastic than the demand the buyer of a good will bear the larger tax burden, when the demand for a good is more elastic than the supply the producer will bear the larger burden of the tax. When the tax placed on buyers of a product increases, the buyers will have to pay more for the good,this will lead to a reduced effective income for the sellers and generally Demand will become less elastic while the supply will now become more elastic as consumer preference will tend to reduce.