If a Tax Is Imposed in a Market in Which

question 35

Multiple Choice

If a tax is imposed in a market in which demand is perfectly inelastic,

• A) the buyers and the sellers both pay a portion of the tax.
• B) the sellers pay the entire tax.
• C) the buyers pay the entire tax.
• D) neither the buyer nor the seller pays the tax.

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Definitions:

Lend Money

The act of giving money to another party under the agreement that it will be repaid, often with interest, at a future date.

Unanticipated Inflation

Inflation that occurs when the general level of prices rises at a rate that was not forecasted or expected by consumers, businesses, or economists.

Saving

The portion of income not spent on current consumption but rather set aside for future use.

Borrowing

The act of obtaining funds from another party with the promise to repay the principal amount along with interest or other charges.