Question

The tax burden falls more heavily on the consumer side regardless of a type of tax (either a sale tax or an excise tax) as long as the supply of that product is relatively more inelastic than the demand for that product.

Group of answer choices

True

False

Answer 1

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The answer is False.

(The supply being relatively more inelastic means that it will show less responsiveness to a imposition of tax compared to the demand.

The diagram below shows a case where supply is more inelastic than demand. And her supplier has to pay more of the tax burden which is shown by area Pe to Pp. Whereas consumer only pays shaded area of Pc to Pe

This means that with an imposition of tax most of the burden is borne by the supplier as it doesn't respond to the same effect the consumer does.)