Consider the following statements about the impact of tax.
1. A tax is shifted forward to consumers if the demand is inelastic relative to supply.
2.

Question

Consider the following statements about the impact of tax.
1. A tax is shifted forward to consumers if the demand is inelastic relative to supply.
2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand.
Which of the statement(s) given above is/are correct?

Accepted Answer

(C) Both 1 and 2

Answer

(A) Only 1

Answer

(B) Only 2

Answer

(D) Neither 1 nor 2