If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a: a. steep (inelastic) demand curve and steep (inelastic) demand curve. b. steep (inelastic) demand curve and a flat (elastic) supply curve. c. flat (elastic) demand curve and a steep (inelastic) supply curve. d. flat (elastic) demand curve and a flat (elastic) supply curve.

the supply curve is very inelastic, that means that the quantity supplied changes very little when the price changes
the demand curve is very elastic, that means that the quantity demanded changes dramatically when the price changes

Since a change in price will affect the quantity supplied very little, but a change in price will plummet the quantity demanded, then the suppliers will be forced to absorb most of tax burden.

Martebi Martebi · Answer 2 · 2021-10-29T11:43:38+02:00

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a flat (elastic) demand curve and a steep (inelastic) supply curve.

Tax incidence is the way with which tax burden is shared between buyers and sellers.

It depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax.

The burden of tax is based on the circumstance, it can fall more on consumers or on producers.

Such as in the case of soft drinks, for example, demand is inelastic because soft drinks are an widely consumed substance and taxes are mainly passed along to consumers in the form of higher prices.

Conclusively, option c is the best option that best describes the statement above.

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