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The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on .

buyers of salt and the buyers of caviar.
buyers of salt and the sellers of caviar.
sellers of salt and the sellers of caviar.
sellers of salt and the buyers of caviar.

Respuesta :

Answer:

The correct answer is: buyers of salt and the sellers of caviar.

Explanation:

The demand for salt is inelastic while its supply is elastic.

The demand for caviar is elastic while its supply is inelastic.

A tax worth $1 is imposed on both salt and caviar.

The tax burden will be shared between the buyers and sellers.

Who shares the most burden depends on the elasticity of demand and supply. Imposition will cause the price to change increasing the price paid by buyers and decreasing the price received by the sellers.

Among these whoever has the most inelastic response to the change in price will bear most of the burden.

Since demand for salt is inelastic, its buyers will bear most of the burden. While the supply of caviar is inelastic so its sellers will bear most of the burden.

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