Suppose a liquor store has to pay $1 of sales tax over a six-pack of Beer. B) If the main customers of the liquor store are perfect price elastic, who pay $1 of sales tax between the liquor store and the main customers? why?

C) If the main customers of the liquor store are perfect price inelastic, who pay $1 of sales tax between the liquor store and the main customers? why?

B). liquor store

C). customer

Explanation:

The burden or the load of the tax to be payed is very much depended upon the relative elasticities of the demand and supply of the product or the item.

B. When the customers have perfectly demand price elastic, the liquor store will have to pay the tax of  1 dollar because as the customers have a perfectly elastic demand, the increase in the price will definitely reduce a quantity demanded by a large percentage. Thus the seller bears the burden of tax completely.

C. And when the customers have a perfectly demand price inelastic , the increase in the price of liquor have no effect on the quantity demanded. This allows or permits the seller to pass the burden of the tax to the customers. So, the customers pays the $1 tax.

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