When a good with a perfectly inelastic demand is taxed, the incidence of the tax is borne:

A. by consumers and producers equally.

B. mostly by producers.

C. entirely by consumers.

D. mostly by consumers.

E. entirely by producers.

Question

Herman

Business

12 December, 10:12

When a good with a perfectly inelastic demand is taxed, the incidence of the tax is borne:

A. by consumers and producers equally.

B. mostly by producers.

C. entirely by consumers.

D. mostly by consumers.

E. entirely by producers.

+2

Answers (1)

Know the Answer?

Camille Ballard · Answer 1

Option (C) is correct.

Explanation:

The goods with a perfectly inelastic demand with any changes in the prices of the commodities are generally have no effect on the demand for a good. This means that if there is an imposition of tax on the good with a perfectly inelastic demand then this will lead to increase the price level by the full amount and therefore, the incidence of this tax is fully borne by the consumers.

When a good with a perfectly inelastic demand is taxed, the incidence of the tax is borne:A. by consumers and producers equally.B. mostly by producers.C. entirely by consumers.D. mostly by consumers.E. entirely by producers.

When a good with a perfectly inelastic demand is taxed, the incidence of the tax is borne:

A. by consumers and producers equally.

B. mostly by producers.

C. entirely by consumers.

D. mostly by consumers.

E. entirely by producers.