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If the Demand Curve Is More Price Elastic Than the Supply

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Essay

If the demand curve is more price elastic than the supply curve in a particular market, will the buyers or the sellers bear a larger burden of a per-unit tax imposed on the market?


Definitions:

Profit Maximization

The process a firm uses to determine the price and output level that returns the highest profit.

Marginal Cost

The rise in overall expense due to the production of an extra unit of a good or service.

Output Produced

The total amount of goods or services created or produced by an economic unit, such as a company or country, within a specific period.

Substitution Effect

The change in the consumption of goods in response to a change in their relative prices, holding the consumer's level of utility constant.

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