When more of tax on a product is borne by the buyer than the seller, the commodity involved has

Answer Details

Tax incidence refers to who ultimately bears the burden of a tax, which depends on the relative price elasticities of demand and supply. When a tax is imposed on a product, the party with the less elastic (more inelastic) response bears a larger share of the tax.

When the buyer bears more of the tax than the seller, it means consumers do not significantly reduce their purchases when the price rises. This describes a commodity with fairly inelastic demand. Because consumers need or strongly prefer the product, they continue buying it even at the higher post-tax price, so sellers can pass most of the tax on to buyers through higher prices.

If demand were elastic, consumers would sharply reduce purchases in response to a price increase, forcing sellers to absorb most of the tax to maintain sales. With perfectly elastic demand, consumers would bear none of the tax at all, as any price increase would drive quantity demanded to zero. Perfectly inelastic demand would mean the buyer bears all of the tax with no reduction in quantity purchased whatsoever. The question states that more (not all) of the tax falls on the buyer, which corresponds to fairly inelastic demand rather than perfectly inelastic demand.