Respuesta :
As part of an anti-obesity program, the government levies an excise tax on high-fat foods. We expect consumers to pay almost all of this tax if demand is inelastic and supply is elastic.
Because the flexibility of demand and supply affects the tax burden. More of the tax burden is borne by people the more inelastic the curve is.
When the elasticity is greater than one, it indicates that the demand or supply is very responsive to changes in price. A demand or supply is said to be inelastic if its elasticity is less than one, indicating that it is not very responsive to price changes.
A boost in demand will cause a small price increase but a significant increase in demand when the supply is elastic. If supply is inelastic, a rise in demand will lead to a big price increase but a little rise in demand. The supply is said to be price inelastic if the price elasticity of the supply is less than 1.
To learn more about demand-supply
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