New Register here for RBI, SEBI & NABARD strategy workshop! April 9 at 7 PM

    Question

    When producer bears the cost of tax, what is the impact

    on elasticity of demand and supply?
    A Supply is more elastic than demand Correct Answer Incorrect Answer
    B No impact on elasticity Correct Answer Incorrect Answer
    C Inelastic supply and elastic demand Correct Answer Incorrect Answer
    D Inelastic demand and elastic supply Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    If the demand for the commodity taxed is elastic, the tax will tend to be shifted to the producer but in case of inelastic demand, it will be largely borne by the consumer. In case of elastic supply, the burden will tend to be on the purchaser and in the case of inelastic supply on the producer. Covered in videos and study notes; snapshot from study notes of the ixamBee SEBI course

    Practice Next