suppose that there is a tax of $5 per unit, and the demand curve is more...

suppose that there is a tax of $5 per unit, and the demand curve is more elastic than the supply curve. Which of the following statements could be true?
A. buyers pay $3 of the tax
B. buyers pay $1 of the tax
C. sellers pay $1 of the tax
D. sellers pay all of the tax

Solutions

Expert Solution

When the demand curve is more elastic than the supply curve then the sellers will bear the major burden of the tax and buyers will bear a smaller burden of the tax so that the buyers pay only $1 of the tax.

Option(B)buyers pay $1 of the tax

Rahul Sunny answered 1 year ago

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