Unformatted text preview: (b) Inelastic Supply, Elastic Demand 2. . . . the incidence of the tax falls more heavily on consumers . . . 1. When supply is more elastic than demand . . . 3. . . . than on producers. 2. . . . the incidence of the tax falls more heavily on producers . . . 3. . . . than on consumers. 1. When demand is more elastic than supply . . . Figure 6-9 H OW THE B URDEN OF A T AX I S D IVIDED . In panel (a), the supply curve is elastic, and the demand curve is inelastic. In this case, the price received by sellers falls only slightly, while the price paid by buyers rises substantially. Thus, buyers bear most of the burden of the tax. In panel (b), the supply curve is inelastic, and the demand curve is elastic. In this case, the price received by sellers falls substantially, while the price paid by buyers rises only slightly. Thus, sellers bear most of the burden of the tax....
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.
- Spring '10