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The demand for cigarettes is price inelastic implying a unit tax on this commodity will

A. Will mainly paid by sellers of the product

B. By mainly paid by cigarette smokers

C. Be mainly paid by tobacco growers

D. None of the above

Correct Answer : B.


Because the demand of cigarettes is inelastic so the burdens of unit tax on cigarettes are imposed on consumers. The more inelastic is demand, the greater the share of a unit tax bear by consumers. And if the more elastic is demand, the greater the share of unit tax bear by producers.}

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