If a tax is imposed on a market with elastic demand and inelastic supply, it is impossible to determine how the burden of the tax will be shared. buyers will bear most of the burden of the tax. sellers will bear most of the burden of the tax. the burden of the tax will be shared equally between buyers and sellers.

In a market with elastic demand and inelastic supply, buyers tend to be more responsive to price changes. This means that when a tax is imposed, buyers will likely reduce their quantity demanded significantly. As a result, sellers, who cannot easily reduce their quantity supplied due to inelasticity, may end up bearing a larger burden of the tax. Therefore, the sellers are more affected by the tax as they cannot pass on the full burden through higher prices without losing too many sales. Understanding the elasticity of demand and supply is crucial here. For instance, if you’re running a business and considering how a new tax might affect your pricing strategy, knowing the elasticity of your product can guide you. It could mean adjusting your prices cautiously to avoid losing customers while still covering the additional tax costs.