Economics (AS & A Level) · Oct / Nov 2025 · Paper 14 · Question 12
9708Methods and effects of government intervention in markets
A government imposes a specific indirect tax on a product that has an inelastic demand curve. What is the incidence of tax in this case?
- AThe tax falls entirely on the consumer.
- BThe tax falls entirely on the producer.
- CThe tax falls to a greater extent on the consumer than on the producer.
- DThe tax falls to a smaller extent on the consumer than on the producer.
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Correct answer: C. The tax falls to a greater extent on the consumer than on the producer.
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