Question

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of

Answer 1

both taxes would fall more heavily on the buyers than on the sellers

Step-by-step explanation:

Here are the options:

a. both taxes would fall more heavily on the buyers than on the sellers. b. the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers c. the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers O d. both taxes would fall more heavily on the sellers than on the buyers.

Tax is a compulsory sum levied on goods and services. Taxes increases the price of goods and services

Supply is elastic if a small change in price leads to a greater change in the quantity supplied.

Demand is inelastic if there's little or no change in demand when price is increased.

More burden of tax should fall on the consumers because their demand is inelastic. So, if prices rise as a result of the tax, there would be little or no change in quantity demanded.

But in the case of suppliers, they are sensitive to price and a rise in price would cause quantity supplied to fall and revenue would fall.

I hope my answer helps you