The demand curve for good X is generally highly inelastic at and around the current price. If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic, then who will pay the greater share of a tax placed on the production of good X?

The buyers will pay the greater share

Explanation:

The burden of tax falls on the person with the less elasticity of demand or supply.

If demand (supply) is elastic, a small change in price has a greater effect on the quantity demanded (supplied).

If demand (supply) is inelastic, a small change in price has little or no effect on quantity demanded (supplied).

If demand (supply) is perfectly inelastic, price has no impact on the quantity demanded (supplied).

If supply is neither perfectly elastic nor perfectly inelastic, it means supply could either by elastic or inelastic. Demand on the other hand is highly inelastic, so consumers bear the greater burden of tax.

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