Under what condition is the tax incidence on buyers higher?

The correct condition for a higher tax incidence on buyers is when supply is more elastic than demand. This situation means that producers can more easily adjust the quantity they supply in response to price changes, making them less burdened by the tax. In contrast, if demand is inelastic relative to supply, buyers cannot easily change their quantity demanded when prices rise due to the tax, leading to a greater share of the tax burden falling on consumers.

Thus, when the supply is highly elastic, suppliers can reduce their quantity supplied significantly in response to a tax increase, passing a larger portion of the tax burden to the buyers who have limited options to substitute away from the taxed good. Buyers, facing less elasticity in their demand, will absorb more of the tax burden, resulting in higher tax incidence on them. This understanding of elasticity relations is key in analyzing how taxes impact market participants.