Author Question: When does the burden of a tax imposed on a good fall more heavily on consumers? What will be an ... (Read 59 times)

KimWrice

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When does the burden of a tax imposed on a good fall more heavily on consumers?
 
  What will be an ideal response?

Question 2

If shoes rise in price, the demand curve for shoes ________ and the quantity of shoes demanded ________.
 
  A) shifts leftward; decreases
  B) shifts leftward; does not change
  C) does not shift; decreases
  D) does not shift; does not change



duke02

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Answer to Question 1

The tax burden falls more heavily on consumers if demand for the good is less sensitive to price changes than its supply, that is, if the elasticity of demand is less than the elasticity of supply. This is because if demand is inelastic, buyers do not reduce their consumption of the good immediately and continue to purchase the taxed good despite the higher price.

Answer to Question 2

C



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