Asked by elena ustimchuk on Jun 04, 2024
Verified
Given demand,the more inelastic the supply of a product,the larger the portion of an excise tax that is borne by producers.
Inelastic
Describes a situation where the demand or supply of a good or service is relatively unresponsive to changes in price.
Excise Tax
A tax levied on specific goods, services, or transactions, often included in the price of the product, such as alcohol, tobacco, and gasoline.
Borne
The bearing or enduring of costs, responsibilities, or consequences by an entity, often in the context of who ultimately pays for or suffers from economic decisions.
- Understand the impact of supply elasticity on the tax burden borne by producers.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
True
Explanation :
When supply is more inelastic than demand, producers have limited options to adjust their production in response to a tax. As a result, they are more likely to pass on the burden of the tax to consumers in the form of higher prices. Therefore, a larger portion of the tax burden is borne by producers.
Learning Objectives
- Understand the impact of supply elasticity on the tax burden borne by producers.