Question

suppose the environmental protection agency imposes an excise tax on polluting firms. in which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Answer 1

In which the demand is highly inelastic and supply is highly elastic would we expect the additional costs to be borne most heavily by consumers.

Demand changes when another economic factor, such as price or income, changes. This is referred to as the elasticity of demand.

If consumer demand for a good or service does not change in response to price changes, this is referred to as inelastic demand.

Luxury goods and specific foods and beverages are examples of elastic goods because demand is affected by price changes.

Tobacco and prescription drugs are examples of inelastic goods because their demand is frequently constant despite price changes.

Demand elasticity measures how demand changes in response to changes in price or income. As the most prevalent economic factor used to measure it, the price of a good or service, it is also known as price elasticity of demand.

Learn more about Demand elasticity, here

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