The government enacts a law to tax the production of an inelastic good like cigarettes who...

The government enacts a law to tax the production of an inelastic good like cigarettes who will pay the enacted tax?

		Buyer
		Buyer and Seller pay equal amounts
		Seller
		Need more information to answer the question

Expert Solution

Generally the burden of a tax falls on both the consumers and the producers. The size of the burden that falls on the buyer and seller will be dependend on the relative price elasticity of demand and supply.

In this situation the cigarettes most likely to have an inelastic demand, so obvioulsy buyers bear most of the tax burden. If thr demand is more inelastic than the supply buyers bear most of the tax burden, like wise if the supply is more inelastic than the demand producers bear the burden.

Ans: Buyer.

Rahul Sunny answered 2 years ago

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