Question

The largest share of a sales tax on snow shovels in NY will fall on sellers...

The largest share of a sales tax on snow shovels in NY will fall on sellers when:

demand and supply are both equally elastic.

the supply of snow shovels is inelastic and the demand is elastic.

the supply of snow shovels is elastic and the demand is inelastic.

demand and supply are both unit elastic.
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Answer #1

The tax burden borne by buyers and sellers depend upon the respective price elasticity of demand and supply. If the demand is more elastic than the supply , the sellers will bear most of the tax burden. On the otherhand, if the supply is more elastic than the demand , the buyers will bear most of the tax burden. If the demand is more elastic than the supply , a change in price will lead to a more than proportionate change in the quantity demanded. The change in the quantity supplied will be less than the change in the quantity demanded. So the burden of the tax fall mostly on sellers.

Ans: The supply of snow shovels is inelastic and the demand is elastic.

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