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JAMB Economics 1980 Question 16

Question 16

Public Finance

In the above diagram, supply and demand conditions of sugar in a Nigerian market are given. An indirect tax of 10 kobo per kg is imposed. It will be paid

Diagram for this question
  1. A.wholly by the supplier
  2. B.wholly by the consumer
  3. C.partly by the supplier and partly by the consumer
  4. D.wholly by the middlemen
  5. E.partly by stockholder and partly by consumer.
Show the answer and explanation

Answer: A (wholly by the supplier)

Explanation

The supply curve in the diagram is vertical: the same quantity is supplied at any price. Sellers cannot pass the tax on without being left with unsold sugar, so they pay all of it.