If Elasticity of Demand Is 0

question 34

Multiple Choice

If elasticity of demand is 0.2, elasticity of supply is 0.5, and a 10 percent excise tax is levied on the good:

• A) the tax burden on suppliers will be greater.
• B) the tax burden on consumers will be greater.
• C) the tax burden will be the same for both.
• D) one cannot say who will bear the greater burden without knowing the tax.