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Is the following statement true or false? Justify your answer.“If the supply is less elastic than...

Is the following statement true or false? Justify your answer.“If the supply is less elastic than the demand, the government will make the most taxrevenue by imposing a tax on the sellers rather than on the buyers.”

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Answer #1

Answer:- “If the supply is less elastic than the demand, the government will make the most tax revenue by imposing a tax on the sellers rather than on the buyers.”

Correct Answer:- True

Reason:- In most of the cases, tax incidence will fall on those who are less responsive to the price change i.e the group which has the most inelastic price-quantity curve. If the demand curve is elastic relative to the supply curve, in this case, the tax will be born disproportionately by the seller.

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