Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?
A)The buyers will pay the entire share.
B)The sellers will pay the entire share.
C)The buyers and the sellers will pay equal shares.
D)The sellers will bear the greater share of the tax.

Question

Quizplus · Accepted Answer

When demand is perfectly inelastic, consumers are willing to pay any price for the good, meaning the entire tax burden falls on the buyers as they absorb the full cost increase.

Suppose the Demand for a Particular Good Is Perfectly Inelastic