If Demand Is Perfectly Inelastic, the Burden of a Tax

question 53

Multiple Choice

If demand is perfectly inelastic, the burden of a tax on suppliers is borne:

• A) entirely by the suppliers.
• B) entirely by the consumers.
• C) mostly by the suppliers and partly by the consumers if the demand curve is inelastic.
• D) partly by the suppliers and mostly by the consumers if the demand curve is elastic.

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Definitions:

Interest Rate

The percentage of an amount of money charged for its use over a specified period, often annually, by lenders to borrowers.

Shareholder

An individual or entity that owns one or more shares of stock in a publicly-traded company, making them partial owners.

Firm's Profits

The financial gains a firm obtains after deducting all expenses, taxes, and costs from its total revenues.

Financial Capital Markets

Marketplaces where individuals and institutions can trade financial securities, commodities, and other fungible assets.