Question

Assume that the supply of corn is relatively price inelastic, while the demand for corn is relatively price elastic. If the government imposes a per-unit excise tax on the production of corn, the incidence of the tax will fall?

Answer 1

Answer:

Producers

Explanation:

Inelastic supply is when a change in price has little or no effect on the quantity supplied.

Elastic demand is when a change in price has a greater effect on the quantity demanded.

Incidence of tax means the burden of tax. It refers to who would pay the tax.

The burden of tax would fall more on producers because their supply is inelastic.

If tax incidence fell on consumers, the quantity demanded of corn would fall as a result.

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