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JAMB Economics 2006 Question 11

Question 11

Elasticity

The burden of a government tax on a commodity whose demand is inelastic will

  1. A.be borne only by the government
  2. B.fall more heavily on consumers
  3. C.be shared equally between consumers and producers
  4. D.fall more heavily on producers
Show the answer and explanation

Answer: B (fall more heavily on consumers)

Explanation

When demand is inelastic, buyers keep buying even at a higher price, so sellers can pass most of the tax on to consumers.