Question

If a unit excise tax is placed on a good for which the demand is very 47) unresponsive to a price change, then A) the producers generally pay the majority of the tax. B) the consumers generally pay the majority of the tax. C) the government generally pays the majority of the tax. D) producers and consumers pay equal portions of the tax.

Answer 1

B) the consumers generally pay the majority of the tax.

Step-by-step explanation:

Unit Excise is an indirect tax ; whose incidence & impact lie on different people and the burden can be shifted among buyers & sellers.

The economic participant (buyers / sellers) having more inelastic market force (demand / supply) shares more burden of the tax. More burden of Indirect tax: lies on buyers if demand is more inelastic (less responsive to price) , lies on sellers if supply is more inelastic (less responsive to price).

So, if Unit Excise tax is placed on a good for which demand is very unresponsive to price change (inelastic) : Consumers (buyers) generally pay the majority of the tax.