ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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**Question:**

Demand for salt is nearly perfectly inelastic. If the government imposes a tax of 10% on salt, what shall be the effect on quantity demanded of salt? Why?

**Explanation:**

Inelastic demand means that the quantity demanded does not change significantly with a change in price. Therefore, even if the government imposes a 10% tax, it is likely that the quantity demanded for salt will remain largely unchanged. This is because salt is a necessity with few substitutes, and consumers will continue to buy it despite the price increase.
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Transcribed Image Text:**Question:** Demand for salt is nearly perfectly inelastic. If the government imposes a tax of 10% on salt, what shall be the effect on quantity demanded of salt? Why? **Explanation:** Inelastic demand means that the quantity demanded does not change significantly with a change in price. Therefore, even if the government imposes a 10% tax, it is likely that the quantity demanded for salt will remain largely unchanged. This is because salt is a necessity with few substitutes, and consumers will continue to buy it despite the price increase.
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