Asked by breana norris on Apr 29, 2024
Verified
A tax on a good whose demand is perfectly price inelastic will be effective in discouraging consumption of that good.
Perfectly Price Inelastic
A situation where the quantity demanded of a good or service does not change in response to a change in price.
Consumption
The use of goods and services by households.
- Understand the impact of a good's price elasticity of demand on the effectiveness of a tax in reducing consumption.
- Understand the conditions under which a tax might not reduce consumption of a good.
Verified Answer
AC
ahmad chebli haj hassanMay 01, 2024
Final Answer :
False
Explanation :
If the demand for a good is perfectly price inelastic, consumers will buy the same quantity regardless of the price, so a tax will not reduce consumption.
Learning Objectives
- Understand the impact of a good's price elasticity of demand on the effectiveness of a tax in reducing consumption.
- Understand the conditions under which a tax might not reduce consumption of a good.
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