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 Group of answer choices

Answer 1

This question is incomplete, the options are missing. The options are the following:

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.

d) Both taxes would fall more heavily on the sellers than on the buyers.

And the correct answer is the option A: Both taxes would fall more heavily on the buyers than on the sellers

Step-by-step explanation:

To begin with, in this situation due to the fact that the demand for both products are inelastic and the supply of both as well are elastic then the change in the price that would happen because of the tax would have an impact that the buyers will feel more than the sellers because they are the one that no matter how much the price changes then the they will keep to consuming the same amount in both cases and that is because their demand are inelastic and therefore that the variation in the price does not change dramastically the variation in the quantity demanded.