Final answer:
The tax burden falls mostly on consumers when the demand is relatively inelastic and the supply is relatively elastic since consumers are less likely to reduce their quantity demanded.
Step-by-step explanation:
When considering the incidence of taxation and how it is distributed between producers and consumers, the key concept to understand is the price elasticity of demand and supply. In this case, if demand for a product is relatively inelastic while the supply is relatively elastic, it indicates that consumers are less sensitive to price changes whereas producers are more responsive to price changes. As a result, when a tax is imposed on such a market, the tax burden primarily falls on the consumers, because they are less likely to reduce their quantity demanded despite the higher price resulting from the tax. The producers, having a more elastic supply, can more easily adjust their production levels and are less affected by the tax.