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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
Ravindra nath mahto
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.