Consider the market for gasoline, a good with a relatively low elasticity of demand. Who will bear the majority of a tax imposed on gasoline?
Sellers will bear the majority of the tax, as long as supply is more elastic than demand.
No one will bear the majority of the tax; the tax burden will be borne equally by both buyers and sellers.
It depends on the tax rate at the time the gasoline is sold.
Buyers will bear the majority of the tax, as long as demand is less elastic than supply.
In the market for gasoline, which has a relatively low elasticity of demand, buyers will bear the majority of a tax imposed on gasoline. This is because when demand is inelastic (meaning consumers are less responsive to price changes), they are less likely to reduce their quantity demanded significantly in response to a price increase caused by the tax.
On the other hand, if supply is more elastic, sellers can more easily adjust their quantity supplied in response to price changes. Therefore, the burden of the tax will fall more heavily on buyers, as they will continue to purchase gasoline despite the higher prices resulting from the tax.
So, the correct answer is:
Buyers will bear the majority of the tax, as long as demand is less elastic than supply.