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In most markets, demand is more elastic in the long-run than it is in the short-run.

Elasticity of demand is determined by the availability of substitutes and the time period being considered. In the short-run because it takes a considerable amount of time to develop competing substitutes, the demand will be inelastic (huge changes in price will lead to small changes in quantity demanded, since consumers have no other products to purchase). But as the duration increases, more substitutes will be available meaning if there is a huge percentage change in price, consumers will move to other products that may be cheaper resulting in a large decrease/increase in quantity demanded giving an elasticity greater than 1.

Provided that the elasticity of supply is neither 0 nor infinity, the burden of a per-unit sales tax falls more heavily on consumers if demand is inelastic than if demand is elastic.

Whenever a sales tax is placed onto goods, it adds to the price of the product which means there will be a shift in the supply curve. We can use two graphs illustrating inelastic demand and elastic demand to show what effect the tax has on price for consumers.

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