Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
When demand for a good is elastic, consumers bear a larger portion of the tax burden.
B
Producers generally bear a larger portion of the tax burden when demand is inelastic.
C
The distribution of the tax burden depends on the relative elasticity of supply and demand.
D
Consumers are always worse off when a tax is imposed, regardless of demand elasticity.
Understanding the Answer
Let's break down why this is correct
Answer
When we talk about tax burden and consumer behavior, we are looking at how taxes affect what people buy and how much they spend. Taxes can increase the overall cost of goods and services, which might make consumers buy less or choose cheaper options. For example, if a new tax is placed on sugary drinks, people might decide to buy water or juice instead because the sugary drinks are now more expensive. Additionally, if consumers expect taxes to rise in the future, they may start saving more money now instead of spending it. Understanding these connections helps us see how taxes can shape our shopping habits and overall economy.
Detailed Explanation
Other options are incorrect because This statement is wrong because when demand is elastic, consumers can easily switch to other products; This is incorrect.
Key Concepts
Tax incidence
Elasticity of demand
Market behavior
Topic
Tax Burden and Consumer Behavior
Difficulty
easy level question
Cognitive Level
understand
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