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Who pays the tax when demand is elastic?

Who pays the tax when demand is elastic?

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Answer #1

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The incidence of tax depends upon the price elasticity of demand and supply.In case of elastic demand producers bears maximum burden of tax.

When tax for elastic demand and inelastic supply e.g.beach resorts and hotels,the sellers have no any option to accept low price for their business as demand is fluctuating for these services.,though supply of their services remains inelastic,it will depends upon the choice and budget of the consumers,so its demand is changing.Burden of tax is more on the seller or producers.

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