Since nondurable goods take up only a small portion of income, we can imagine that buyers will not react greatly to changes in price. The demand curve is relatively price inelastic and thus the consumers bear most of the tax burden. A rise in the price of a good with many close substitutes will cause the consumers to buy more of the substitute. The quantity demanded of the original good will greatly fall, because the demand curve for such goods is relatively price elastic. The producers will bear most of the tax burden.
Necessities are by definition goods that consumers have to buy.
The consumer does not have the option of not buying the good should the price of the good rise. Therefore, the demand curve for necessities is relatively price inelastic, and the consumers will bear most of the tax burden. Should the price of a luxury good rise, the consumers can opt to forgo buying it without much difficulty. The demand curve is relatively price elastic, and the producers will bear most of the tax burden. Tax revenue is greatest in case C, when the demand curve is relatively price inelastic .