Question

Suppose the supply of shaved ice is more elastic with respect to price in the long run than in the short run. All else equal we should expect that a tax on shaved ice Question 5 options: falls equally on buyers and sellers in the short run and in the long run. falls more on buyers in the short run than in the long run. falls more on sellers in the short run than in the long run. falls to the same degree on buyers in the short run as in the long run. falls equally on buyers and sellers in the short run but not the long run.

Answer 1

Answer:

The answer in this case would be the last option in the answer list or options given in the question or falls equally on buyers and sellers in the short run but not the long run.

Explanation:

• In Microeconomics,elasticity level of supply usually has an inverse or negative relationship with the tax burden in the market.
• Therefore,higher elasticity of supply among the sellers or firms implies that they are relatively more sensitive or responsive to any price change in the market and would not be much willing to accept the burden of the tax which is reflected by an increase in the production cost of output or acceptance of a lower relative price for the output sold.
• Hence,the sellers or firms will reduce the quantity supplied of the output considerably in the market due to the tax imposition in the long run.Thus,even if the tax burden might be equally distributed among both the consumers/buyers and sellers/firms,the buyers/consumers will have a higher tax burden in the long run than the sellers/firms due to higher price elasticity of supply in the long run.