NABTEB Economics 2022 Objective — Question 41

Question 41 of 50 from the National Business and Technical Examinations Board (NABTEB) Economics 2022 Objective paper, with the correct answer and a full explanation.

If demand is perfectly inelastic, a tax imposed

A. is borne only by the producer
B. is borne only by the consumerCorrect
C. will have greater impact on the seller
D. will have equal impact on the buyer

Explanation

Where demand for a commodity is perfectly inelastic, the burden of the tax is entirely borne by the consumers alone, since they do not react to the price change and the whole burden is shifted onto them.

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