Question

An excise tax levied on a product will impose a larger relative burden on consumers (and a smaller relative burden on sellers) when a. the supply of the product is relatively inelastic. b. the supply of the product is relatively elastic. c. the demand for the product is relatively inelastic. d. either b or c is true

Answer 1

d. either b or c is true

Step-by-step explanation:

Tax burden refers to who pays the tax.

Taxes increases the price of a good or the cost of production.

If demand or supply is elastic, it means that quantity demanded or supplied is sensitive to changes in price.

Demand or supply is inelastic if quantity demanded or supplied is less sensitive to changes in price.

If supply is elastic and the burden of tax falls on suppliers, suppliers would reduce the quantity supplied

If demand is inelastic and the burden of tax falls on consumers, the quantity demanded would not change as a result of price increase.

In this case, greater burden of tax should fall on consumers.

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