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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
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Answer is given 1. i think it's 3. kindly confirm.
Answer is given 1. I think it's 3. kindly confirm.................
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Aabha mishra 1 Best Answer
When the demand is inelastic and supply is elastic then burden of paying tax will be less on producer and when the supply is inelastic and demand is elastic then the burden of paying tax will be less on consumers and according to the question the correct answer will be option 3 as it is saying that demand is inelastic and supply is perfectly elastic hence the whole burden of tax will be borne by consumer.
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Ravindra nath mahto![best-answer]()
Anushka, you are absolutely right. As far as the answer is option 1. We can easily prove that answer wrong by following logic. Because if the demand is perfectly elastic, it means that a very small rise in the price will cause zero quantity of demand. Then how can the producer pass the whole burden of tax when a very small rise in the price causes no demand. Hence, obviously the option 1 cannot be the correct answer. Now let us discuss about the option 3. If the demand is perfectly inelastic, it means that any rise in the price cannot change the quantity demanded at all. In this case, producer has the scope to pass whole burden of the tax on the consumer because any change in the price do not affect the quantity demanded. Now, it is confirmed that the option 3 is the correct answer.