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Suppose the government introduces a sales tax on an energy drink. If the price elasticity of demand for the energy drink is -1.5, and the
Suppose the government introduces a sales tax on an energy drink. If the price elasticity of demand for the energy drink is -1.5, and the price elasticity of supply is 0.5, then the tax burden:
a.will fall mainly on consumers because it is a sales tax.
b.will fall mainly on the producer because demand is relatively more price elastic than supply.
c.equally shared between consumers and the producer because quantity demanded equals to quantity supplied in equilibrium.
d.none of the above because more information is needed to make a judgement.
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