Suppose the Demand Curve for a Good Is Highly Elastic

question 33

Multiple Choice

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

• A) buyers and sellers will each share 50 percent of the burden, regardless of the elasticities of the demand and supply curves.
• B) sellers will bear a larger share of the tax burden.
• C) the distribution of the burden will depend upon whether the buyers or the sellers are required to send the tax to the government.
• D) buyers will bear a larger share of the tax burden.

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Definitions:

Fixed Assets

Long-term tangible assets that a firm owns and uses in the production of its income and is not expected to be converted into cash in the short term, such as buildings, machinery, and land.

Depreciation

A method in accounting that spreads the expense of a tangible asset across its lifespan.

Useful Services

Refers to the benefits or utilities that consumers receive from a product or service, contributing to its value in fulfilling particular needs.

Insurance Policy

An insurance policy is a contract between an insurer and the policyholder, detailing the terms under which the insurer agrees to compensate the policyholder for specific losses or damages covered by the policy.