Question

Suppose someone believes that if a per-unit tax is placed on the producers of good Y, the consumers of good Y will end up paying the full tax. This person assumes that the demand curve for good Y is

elastic.
O perfectly inelastic
O inelastic
O perfectly elastic
O unit elastic.

Answer 1

The correct answer is option (B) perfectly inelastic

Step-by-step explanation:

It is a known facts that anytime tax is imposed on any goods at any given time, the tax falls totally on the consumers provided the elasticity of demand is zero.

Since increase in tax doesn't affect the demand for goods and services, and no matter the increment in price from the supplier, the demand remains the same. Therefore, the demand curve for goods Y is said to be perfectly inelastic.