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JAMB Economics 2010 Question 8

Question 8

Elasticity

If the demand for a good is more elastic than its supply, the tax burden is borne

  1. A.equally by consumers and producers
  2. B.more by producers
  3. C.more by consumers
  4. D.more by retailers and producers.
Show the answer and explanation

Answer: B (more by producers)

Explanation

The side of the market that is less elastic bears more of a tax. If demand is more elastic, sellers cannot pass much of the tax on, so producers bear more of it.