If demand for a product is perfectly inelastic,an output tax will be shifted

Question

Quizplus · Accepted Answer

If demand for a product is perfectly inelastic, it means that consumers will continue to buy the same quantity of the product regardless of any changes in its price. This implies that the burden of an output tax cannot be shifted to consumers, as they will not reduce their demand for the product. Therefore, the entire amount of the tax will be absorbed by the producer and passed on to consumers in the form of higher prices, resulting in a complete forward shift of the tax burden.

If Demand for a Product Is Perfectly Inelastic,an Output Tax