Demonstrate Graphically and Explain Verbally That the Buyers Bear the Entire

question 10

Essay

Demonstrate graphically and explain verbally that the buyers bear the entire burden of a tax when demand is perfectly inelastic.

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Definitions:

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and loan payments.

Marginal Productivity

Marginal productivity measures the change in output resulting from altering the level of a single input while holding other inputs constant.

Marginal Costs

The added financial burden of creating one more unit of a product or service.

Average Costs

The total cost of production divided by the quantity produced, often used to evaluate production efficiency.