A commodity with perfectly inelastic demand has the burden of tax borne by

Step 1: Analyze the question We need to find who bears the tax burden when demand for a good is perfectly inelastic (price elasticity of demand = 0).

Step 2: The concept Tax incidence depends on the relative elasticities of demand and supply:

• The more inelastic side of the market bears more of the tax burden.
• The more elastic side can more easily move away from the product, so it escapes more of the tax.

With perfectly inelastic demand, the quantity demanded does not change at all when the price rises. The demand curve is a vertical line.

Step 3: Solution

1. The government imposes a tax, which shifts the supply curve upward by the amount of the tax.
2. Because demand is vertical, buyers keep buying the same quantity, whatever the price.
3. Sellers therefore raise the price by the full amount of the tax.
4. The buyers pay the entire tax through the higher price, while sellers receive the same net price as before.

So the entire burden falls on the buyers (consumers).

Step 4: Check the other options

• A: Both sellers and buyers share the burden only when demand is neither perfectly inelastic nor perfectly elastic.
• C: The government collects the tax. It does not bear the burden.
• D: The government does not bear the burden, so this is wrong.

Correct answer: B. The buyers alone.

Exam tip: Remember "the inelastic side pays." If demand is inelastic, buyers pay the tax. If supply is inelastic, sellers pay it. Perfectly inelastic demand means buyers pay 100%.