In a market where supply and demand are both somewhat elastic, but supply is mor

Question

In a market where supply and demand are both somewhat elastic, but supply is more elastic than demand, producers will bear less of the burden of a tax because:

Choose one

:A. both parties have equal ability to change their behavior in response to the tax.

B. consumers have a greater ability to change their behavior in response to the tax than producers do.

C. producers have a greater ability to change their behavior in response to the tax than consumers do.

D. producers are more likely to be responsible for paying the tax out of pocket.

E. consumers will experience higher prices as a result of the tax.

Explanation / Answer

(C) In a market where supply and demand are both somewhat elastic, but supply is more elastic than demand, producers will bear less of the burden of a tax because a more elastic supply curve means that the responsiveness of supply to price change is relatively more than the demand curve or in other words suppliers adapt more easily to market distortions like tax due to their greater responsiveness.

Thus producers will bear less of the burden of a tax because producers have a greater ability to change their behavior in response to the tax than consumers do.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.